Financial markets are instrumental to the workings of the economy. However, these markets do not exists in a vacuum but evolve from the interactions of market participants within the boundaries of market institutions. The importance of financial markets have grown over time, measured e.g by volume traded or the share of the total output of the economy. This, together with the recent financial crisis, has brought into light the importance how financial markets actually work.
The objective of this course is to provide an introduction to the workings of modern financial markets. There are many different "players" using these markets. On the one hand, corporations, governments, and other institutions use the financial markets to raise funds (i.e. borrow money) for capital investments. On the other hand, these funds are provided by private and institutional investors (by buying securities issued by corporations, or depositing money with banks, etc.). Banks and other financial institutions (e.g. pension or mutual funds, etc.) act as intermediaries between investors and borrowers. Globalization has made financial markets to a cross-border, international, arena.
More specifically, the course focuses on the mechanisms by which securities are traded in modern financial markets and the implications of trading mechanisms for the efficiency and liquidity of markets. It covers all major asset classes (money markets, equities, FX and bonds) and treats theoretical work on trading mechanisms and market outcomes, related empirical work and the application of microstructure analysis to practical trading scenarios. It closes with a focus on some topical issues for financial markets, including how digitalization has transformed financial markets.
- Introduction to financial markets: Fundamental principles of finance. Different markets and instruments.
- Why do we have financial markets? Consumption smoothing (Fisher-model) and risk-sharing.
- Market participants: Governments, firms, funds, asset managers, banks, central banks, regulators, etc. International participants.
- Interest rates: Loanable funds equilibrium
- Delegated portfolio management. Active vs. passive investment
- Generic market structures (secondary markets)
- Market prices/Market liquidity
- Financial crises
- Topical issues and controversies in financial markets : Digitalization, High frequency trading, electronic trading platforms.
This is an excerpt from the complete course description for the course. If you are an active student at BI, you can find the complete course descriptions with information on eg. learning goals, learning process, curriculum and exam at portal.bi.no. We reserve the right to make changes to this description.