Capital Markets
Code: 102327 ECTS Credits: 6| Degree | Type | Year | Semester |
|---|---|---|---|
| 2501572 Business Administration and Management | OT | 4 | 2 |
| 2501573 Economics | OT | 3 | 2 |
| 2501573 Economics | OT | 4 | 2 |
Contact
- Name:
- Maria Antňnia Tarrazon Rodon
- Email:
- mariaantonia.tarrazon@uab.cat
Use of Languages
- Principal working language:
- catalan (cat)
- Some groups entirely in English:
- Yes
- Some groups entirely in Catalan:
- Yes
- Some groups entirely in Spanish:
- No
Other comments on languages
the same as in previous coursesTeachers
- Guilhem Fraysse
- Ramón Prat Casanovas
Prerequisites
Students enrolling in this subject are expected to have taken 'Finance I' (102329) previously.
Objectives and Contextualisation
This subject studies the properties of financial markets and financial strategies. More specifically, it analyses financial transactions of four different natures: investment, speculation, hedging and arbitrage, undertaken in markets of primitive assets (stocks and fixed-income securities) and in derivatives markets (options, futures and swaps). The course is centred on the role of risk in financial markets.
Main goals of the course are the design of financial strategies and risk management in the short and the long terms, from the firms’ point of view as well as the investors’ point of view.
Competences
- Business Administration and Management
- Apply the basic statistics for improving capacity for work in situations of risk, understanding their origins and developing possible strategies for reducing or mitigating their effects.
- Apply theoretical knowledge of finances to improve relations with sources of financing, identifying the different forms of financing and the advantages and disadvantages for the company and the providers.
- Capacity for adapting to changing environments.
- Capacity for independent learning in the future, gaining more profound knowledge of previous areas or learning new topics.
- Capacity for oral and written communication in Catalan, Spanish and English, which enables synthesis and oral and written presentation of the work carried out.
- Demonstrate initiative and work individually when the situation requires it.
- Manage conflicts of interest and in particular conflicts involving proposals for the fair distribution of value generated.
- Organise the work in terms of good time management, organisation and planning.
- Select and generate the information necessary for each problem, analyse it and take decisions based on that information.
- Take decisions in situations of uncertainty, demonstrating an entrepreneurial and innovative attitude.
- Work well in a team, being able to argue proposals and validate or reject the arguments of others in a reasoned manner.
- Economics
- Apply the basic statistics for improving capacity for work in situations of risk, understanding their origins and developing possible strategies for reducing or mitigating their effects.
- Apply theoretical knowledge of finances to improve relations with sources of financing, identifying the different forms of financing and the advantages and disadvantages for the company and the providers.
- Manage conflicts of interest and in particular conflicts involving proposals for the fair distribution of value generated.
- Value ethical commitment in professional practice.
Learning Outcomes
- A capacity of oral and written communication in Catalan, Spanish and English, which allows them to summarise and present the work conducted both orally and in writing.
- Apply the main principles of risk management.
- Apply the methodology of financial economy reasoning and differentiate it from its equivalent in real economy.
- Assess ethical commitment in professional activity.
- Assess investment opportunities from a strategic perspective.
- Assess investment plans.
- Assess the creation of value in finance markets.
- Assess the formation of prices and risk premiums in finance markets.
- Assess the formation of value of the assets of companies.
- Capacity to adapt to changing environments.
- Capacity to continue future learning independently, acquiring further knowledge and exploring new areas of knowledge.
- Define the characteristics of different sources of finance.
- Demonstrate initiative and work independently when required.
- Demonstrate knowledge of the variables determining the formation of value.
- Describe the characteristics and objectives of financial regulation from the perspective of market efficiency.
- Formulate indebtedness and dividend policies.
- Make decisions in situations of uncertainty and show an enterprising and innovative spirit.
- Master the assessment principles of assets, bŕsics and derivatives.
- Organise work, in terms of good time management and organisation and planning.
- Select and generate the information needed for each problem, analyse it and make decisions based on this information.
- Select and interpret the financial information of markets and companies.
- Understand the formation of value from the perspective of shareholders.
- Work as part of a team and be able to argue own proposals and validate or refuse the arguments of others in a reasonable manner.
Content
1. Multifactor models in capital markets: CAPM and APT
1.1. Macroeconomic factors in the APT model
1.2. Systematic factors in the BARRA model
1.3 The risk premium
1.4 Factor portfolios
2. Financial strategies with equity portfolios
2.1 Active versus passive strategies
2.2 Financial strategies and market efficiency
2.3 Active strategies of microeconomic basis
2.4 Active strategies of macroeconomic basis
3. Performance evaluation of equity portfolios
3.1 The return-risk approach
3.2 Performance indices by Sharpe, Jensen and Treynor
3.3 Performance allocation
4. Fixed-income markets and securities
4.1 Bond pricing
4.2 Different types of risk affecting bond management
4.3 Duration and convexity
4.4 Fixed-income strategies
5. Futures markets: Pricing and strategies
5.1 Forward and futures contracts.Contracts on commodities,currencies, financial assets and weather
5.2 Mechanics and functions of futures markets
5.3 Pricing futures contracts
5.4 Hedging strategies using futures
6. Swaps: Types and strategies
6.1 Definition of swap
6.2 Currency swaps
6.3.Interest rate swaps
6.4 Hedging strategies using swaps
7. Trading strategies using options
7.1 Option characteristics and option pricing: A review
7.2 Spreads
7.3 Combinations
7.4 Introduction to exotic options
Methodology
65.66% of credits (32.5 hours) are theoretical and 34.34% (17 hours) are practical. Theory is taught through lectures. Lecturers will introduce the topics encouraging students’ participation through questions and observations. In each topic presentation of contents will be accompanied by the analysis of the methods applied.
The practical part will consists of problem solving (with and without software), analysis of corporate and financial market information, and selected readings. Students are expected to participate actively by solving exercises and analysing published information, especially financial websites of stock exchanges, fixed-income markets, derivatives markets, corporations and investment funds. Problem solving in the classroom will insist on the usage of specific software (especially spreadsheets).
The proposed teaching methodology may undergo some modifications according to the restrictions imposed by the health authorities on on-campus courses.
Annotation: Within the schedule set by the centre or degree programme, 15 minutes of one class will be reserved for students to evaluate their lecturers and their courses or modules through questionnaires.
Activities
| Title | Hours | ECTS | Learning Outcomes |
|---|---|---|---|
| Type: Directed | |||
| Case studies and exercises | 17 | 0.68 | 2, 3, 7, 8, 14, 15, 18, 20, 21, 5 |
| Master classes | 32.5 | 1.3 | 2, 3, 7, 8, 1, 22, 14, 15, 18, 17, 20, 21, 5 |
| Type: Supervised | |||
| Tutorials | 22.5 | 0.9 | 2, 3, 7, 8, 1, 18, 19, 20, 21, 5 |
| Type: Autonomous | |||
| Searching documents and references | 12 | 0.48 | 8, 19, 21 |
| Solving exercises and case studies | 41 | 1.64 | 2, 3, 8, 10, 1, 11, 13, 14, 15, 18, 19, 17, 20, 21, 23, 5 |
| Studying | 20 | 0.8 | 2, 7, 1, 11, 22, 13, 15, 18, 19, 17, 21, 23, 9, 5 |
Assessment
The evaluation of 'Capital Markets' consists of two components:
a) Continuous evaluation (55% of the grade, being the weight of the midterm exam 30%)
b) Exam at the end of the semester (45% of the grade).
The continuous evaluation consists of written evaluations according to two different methodologies following the rules of the Faculty of Economics and Business.
Participation in all evaluation activities is compulsory to pass the continuous evaluation.
The final grade is calculated as the weighted average of the mark on the continuous evaluation (55%) and the mark on the final exam (45%). To pass the subject students need an average grade higher than or equal to 5.0 (over 10).
Re-evaluating the subject consists of a retake exam on the whole contents of the subject and it is subject to the following rules of the Faculty of Economics and Business of the UAB.
The proposed evaluation activities may undergo some changes according to the restrictions imposed by the health authorities on on-campus courses.
RULES OF THE FACULTY OF ECONOMICS AND BUSINESS ON EVALUATION AND RETAKING
Calendar of evaluation activities
The dates of the evaluation activities (exercises in the classroom, assignments, ...) will be announced well in advance during the semester.
The dates of the midterm exam and the exam at the end of the semester are scheduled in the evaluation calendar of the Faculty.
"The dates of evaluation activities cannot be modified, unless there is an exceptional and duly justified reason why an evaluation activity cannot be carried out. In this case, the degree coordinator will contact both the teaching staff and the affected student, and a new date will be scheduled within the same academic period to makeup forthe missed evaluation activity." Section 1 of Article 115. Calendar of evaluation activities (Academic Regulations UAB). Students of the Faculty of Economics and Business, who in accordance with the previous paragraph need to change an evaluation activity date must process the request by filling out an Application for exams' reschedule
https://eformularis.uab.cat/group/deganat_feie/nou-reprogramacio-de-proves
Grade revision process
After all grading activities have ended, students will be informed of the date and way in which the course grades will be published. Students will be also be informed of the procedure, place, date and time of grade revision following University regulations.
Retake Process
"To be eligible to participate in the retake process, it is required for students to have been previously been evaluated for at least two thirds of the total evaluation activities of the subject." Section 3 of Article 112 ter. The recovery (UAB Academic Regulations). Additionally, it is required that the student to have achieved an average grade of the subject between 3.5 and 4.9.
The date of the retake exam will be posted in the calendar of evaluation activities of the Faculty. Students who take this exam and pass, will get a grade of 5.0 for the subject. If the student does not pass the retake, the grade will remain unchanged, and hence, student will fail the course.
Irregularities in evaluation activities
In spite of other disciplinary measures deemed appropriate, and in accordance with current academic regulations, "in the case that the student makes anyirregularity that could lead to a significant variation in the grade of an evaluation activity, it will be graded with a 0, regardless of the disciplinary process that can be instructed. In case of various irregularities occur in the evaluation of the same subject, the final grade of this subjectwill be 0". Section 10 of Article 116. Results of the evaluation. (UAB Academic Regulations).
Rules of the Universitat Autonoma de Barcelona concerning the grade «Unassessable / No avaluable»
A student receives the grade «Non-assessable / No avaluable» when there is insufficient evidence of his/her participation in the evaluation of the subject.
In 'Capital Markets' (102327) this will be the case if the student has participated in less than 45% of the evaluation activities.
Assessment Activities
| Title | Weighting | Hours | ECTS | Learning Outcomes |
|---|---|---|---|---|
| Final exam | 45% | 2 | 0.08 | 2, 3, 7, 8, 10, 1, 11, 22, 12, 13, 14, 15, 18, 16, 19, 17, 20, 21, 23, 4, 9, 5, 6 |
| First continuous evaluation task | 30% | 1.5 | 0.06 | 3, 7, 8, 1, 14, 16, 17, 20, 21, 5 |
| Second continuous evaluation task | 25% | 1.5 | 0.06 | 2, 3, 7, 8, 1, 11, 22, 14, 15, 16, 21, 5 |
Bibliography
Basic bibliography:
BODIE, Z.; A. KANE; A. J. MARCUS. Investments. 12th edition. New York: McGraw-Hill, 2021.
HULL, J. Fundamentals of Futures and Options Markets. 9th edition. Pearson. 2017.
ROSS, S.A.; R.W. WESTERFIELD; J. JAFFE; B. JORDAN. Corporate Finance. 12th edition. New York: McGraw-Hill, 2019.
Complementary bibliography:
LEE, C-F.; LEE, A.C. (eds.). Encyclopedia of Finance. 2nd edition. e-book. Springer, 2013. UAB e-catalogue.
The New Palgrave Dictionary of Economics. Macmillan. e-book. 2018. UAB e-catalogue.
Software
Excel
The subject counts at the Virtual Campus with different Excel files constructed ad hoc for 'Capital Markets' by the lecturers of the subject.