Description:
| Aims:
* To provide an introduction to financial markets and their operation;
* To understand the pricing of financial instruments;
* To enable students to understand the links between financial markets and the real economy;
* To demonstrate linkages between economic policy and financial markets.
Learning Outcomes: At the end of the unit students should be able to:
* analyse the roles of financial markets and financial intermediaries;
* explain how the pricing of financial instruments takes place;
* understand the link between financial markets and economic policy.
Skills: Use and analysis of economic data; problem-solving; understanding of financial and monetary theory expressed in written form through an examination.
Content: Financial decision making with risky assets; portfolio diversification; introduction to the CAPM model; interest rate determination; overview of the operation of money markets and how money market instruments are priced; introduction to bond markets; the term structure of interest rates; introduction to derivative markets - futures, options, swaps.
Key texts:
* Howells, P and Bain, K. The Economics of Money, Banking and Finance (4e, Pearson Education, 2008); * Mishkin, F. S. The Economics of Money, Banking and Financial Markets (Pearson, Addison-Wesley, 2007), 8th edition.
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