Money and Capital markets

The module aims to present valuation methods and discuss the most importantt instruments of modern money and capital markets. More specifically, we shall discusss fixed income security markets, swap markets, future and option markets and stockk markets. Furthermore, important issues on the informational efficiency of these marketss will be critically evaluated along with theoretical inconsistenciess and puzzles (limits to arbitrage, equity premium puzzle, closed end fund puzzle, dividend puzzle, etc).

Objectives

Learning objections: Visualization the structure of the bond market, stock market, option market, future market and swap market. Understanding of the market structure of the corporate and municipal debt markets. Description of the structure of equity markets and the fundamentals that help determine their price.

Prerequisites

Not required.

Syllabus

Introduction, Definitions, Bonds, Pricing, Duration, Convexity, Credit Default Swaps, Securitization, Catastrophe Bonds, Structured Bonds, Credit Rating. Portfolio Theory (Markowitz), Market risk, optimal portfolio, diversification, Interest rate swaps, currency swaps, pricing, Forward and futures contracts. Differences, trading, and pricing, Options Contracts, calls, puts; trading and pricing, financial system, IPOs, symmetric and asymmetric information theories, regulatory market framework, stocks, Fundamental (valuation methods, P/E, ratio analysis, etc) and technical analysis (Dow Theory, Support & Resistance, Moving Average, Relative Strength Indicators, Advance/Decline Ratio, Short Selling, Gaps, etc), Market efficiency, arbitrage; market puzzles and theoretical inconsistencies (equity premium puzzle, closed end fund puzzle, dividend puzzle, contrarian and momentum strategies, the value anomaly, etc), Review and conclusions