Financial Markets

Within this course you will learn about price formation and liquidity in securities markets. You will discover the determinants of market depth and security trading. In particular, the course focuses on price formation and liquidity in securities markets. The main issues covered are how to measure trading costs; how security prices, their liquidity and speed of price discovery are jointly determined, and how order flow affects prices; what are the determinants of market depth; how security trading is organized and regulated and how it has been reshaped by algorithmic and high frequency trading; how the organization of security trading affects trading costs and informational efficiency.

This course covers standard derivative pricing models. Both discrete time and continuous time techniques are considered. The course also includes an introduction to numerical option pricing, in particular the Monte Carlo Method. After this course, students should have a good knowledge of financial markets, security pricing, arbitrage, interest rates, risk and return. Contents: 1) Definition and classification of financial assets 2) Discrete-time pricing models 3) Continuous-time pricing models 4) Fixed income products 5) Monte Carlo methods for derivative pricing

By taking this course, students will learn the role played by financial intermediaries in modern economies, their vital role to finance investments and the sources of risk associated with such intermediation activity. The course is structured to provide students with both theoretical notions, through the derivation of models developed by the literature, and empirical application, that are based on real data analyses.The topics covered include the role of financial development and banking activity for economic growth; the role of banks for the occurrence of financial crisis and the regulatory initiatives to avoid excessive risk-taking; the propagation of financial intermediaries for macroeconomic shocks; the microeconomics of banking, with emphasis on the role of market competition and the determinants of bank-firm relationships; the technological innovation that takes the name of “Fintech revolution” and how it is potentially disrupting traditional financial intermediation. Suggested prerequisites for this course are microeconomics, econometrics and mathematics for economists.