The aim of this course is to provide an introduction to the way that financial markets and institutions are organised, and how trading in financial instruments works. The most fundamental instruments, bonds, shares and derivatives, are studied in detail with focus on how they are priced in the markets and the factors that affect this. This requires theoretical insight into the thinking of individual savers, or investors, when balancing risks and returns. Theoretical portfolio models, such as CAPM, provide insight into the balance between risk and return. Another aim of the course is that you will learn to apply these theoretical models to real data observations. In this context, index models and the enlargement of those models, known as multi-index models, are used and discussed. The course ends with an introduction to pricing and basic investment strategies for derivative instruments, such as options and forward contracts, where you will learn to calculate and explain design strategies for using derivative instruments.

Course design

The course is taught through lectures, though some group work may be required in addition. There is a written examination.