Student guide Faculty of Economics A.Y. 2008/09

Economics and Techniques of Financial Markets
Lesson timetable, Notice board, Additional material
Lecturers
TAVERNA ANTONIO
FUMAGALLI MARCO
Aim of the course
The course begins with a general introduction to the financial system, the structure of the markets and the evaluation of financial instruments. The focus then shifts specifically onto the techniques of the principal market operations, studied from the different perspectives of the issuing firm and the financial intermediary (investment bank) that offers its services.
There will also be some lessons devoted to the illustration of real-world case studies.
Syllabus
1
The financial system:
  • Functions (allocation, monetary, transmission of economic policy)
  • Instruments
  • Intermediaries and markets
  • Rules
2
Services and products offered by the financial system
Efficiency and stability of the financial system
  • Informational, valuation, operational efficiency
  • Stability of the financial system
3
Actors of the financial system
  • Bank intermediaries
  • The securities industry
Financial decisions of households and firms
  • Information and information asymmetries
  • Decisions of households (life cycle theory)
  • Financial decisions of firms (Miller Modigliani model)
4
Valuation of financial activities: Debt (I)
Characteristics of bonds:
  • Issuer and credit risk; maturity (callable and putable)
  • Dividend flows (fixed, variable)
  • Calculating the value of a bond
  • Yield to maturity
  • Duration
5
Valuation of financial activities: Debt (II)
The yield-to-maturity curve
  • The term structure
  • Forward rates
  • Theories which explain the shape of the curve (expectations theory, liquidity premium theory, segmentation theory)
6
Valuation of financial activities: Shares (I)
  • The Gordon model
  • The DCF model
7
Valuation of financial activities: Shares (II)
  • The multiples method
Financial analysts and their activities
  • Flows of information to the market:
  • The market consensus
  • Analysts and conflicts of interest
8
Financial markets (I)
  • Historical origin
  • Classification: primary/secondary; regulated/OTC; physical / electronic
  • Order driven / price driven markets
  • Post trade structures
  • The MiFID Directive (interna
  • lization of exchanges; pre trade / post trade transparency) systematic internalizers
  • Principal characteristics of the Borsa Italiana /LSE markets
9
The primary equity market
  • Public share offerings and placements to institutional investors
  • Pricing and bookbuilding
  • Information asymmetries between global coordinators and investors
10
The primary bond market
  • Nature of the corporate market
  • Types of bonds
  • Guarantees and standard clauses
  • Modes of issuing
  • Structured bonds
11
Securitized securities
  • Nature of the securitization operation
  • Types of certificates (ABS, MBS, ..) and issuers (financial/corporate)
  • Tranches and Overcollateralisation
  • Example of an issue
12
Mergers/demergers of listed companies.
  • The merger as a means of acquisition
  • Civil law regulations
  • Merger and LBO
  • Share exchange ratios and valuation methods
  • Accounting issues (overview)
  • Reverse Mergers and listing
13
MTO and private benefits of control
  • Economic reasons for the mandatory MTO
  • Passivity rule and mandatory MTO
  • The new European regulation and the Italian regulation
Examinations
Students who attend class will be assessed by means of (i) a brief test to be completed in groups of no more than three students (take home exam) and (ii) a written test in class, consisting mainly of multiple choice questions.
Distance students will be assessed by a written test in class and by an oral test, both to be taken on the same day.
Reading list
M. Onado – Mercati ed intermediari finanziari – Il Mulino 2000
G. Forestieri (editor) – Corporate & Investment Banking – EGEA 2007 (4th edition)
 
Additional reading materials and references will be given during the course.