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2010/2011  BA-HA_E160  Trading in Financial Markets

English Title
Trading in Financial Markets

Course Information

Language English
Point 7,5 ECTS (225 SAT)
Type Elective
Level Bachelor
Duration One Semester
Course Period Autumn
Pending schedule: Wed.:14.25-17.00, week:36-41, 43-46
Time Table Please see course schedule at e-Campus
Study Board
Study Board for BSc in Economics and Business Administration
Course Coordinator
Bjarne Florentsen - bf.fi@cbs.dkSecretary Marianne Andersen - ma.fi@cbs.dk
Main Category of the Course
  • Finance

Taught under Open University-Taught under open university.
Last updated on 29 maj 2012
Learning Objectives
Through a combination of lectures and a dialogue and case based approach the student is trained in application of theoretical content to analyse, reason and recommend in relation to the actual theory and cases as well as examples.

To get the grade 12 the student should at the end of the course demonstrate:
  • Knowledge of the course’ crucial themes, theories and concepts as listed below
  • Ability to choose, combine and apply these in analysis of theory/cases/examples
  • Ability to draw conclusions and recommendations based on this
This course requires that the students have obtained good results in a Financial Management course. In addition the course requires practical use of various derivative products like options and futures. It is the responsibility of the student to ensure the knowledge of these products, preliminary to following course.
4 hour closed book exam
Censorship No censorship
Exam Period Winter Term
The exam is a 4 hour written closed book exam. The exam is PC-based with no internet access. No other exam aids.
Compulsory assignments (pass/no pass) during the course.
Assesment according to the 12-point scale.
Prerequisites for Attending the Exam
Course Content

This course aims at introducing the student to the use of the platforms of negotiation, to the principal financial markets, and to the interactions existing between these markets and the operations in trading room. Furthermore, in the course the student is introduced to issues such as the return on a position, the various trading strategies and their objectives, and the investment decision.

A preliminary list of theories, concepts, and cases dealt with during the course includes:

Session 1: Introduction to the course and to trading in financial markets

  • Trading of financial assets
  • Market microstructure
  • Trading and transaction costs
  • Behavioural Finance (Markets in practice)
  • Introduction to FTS Trading Case IN2

Session 2: Valuation in general and technical analysis

  • Valuation in general
  • Technical Analysis
  • Trading Case #1: FTS Trading Case IN2

Session 3: Futures and options on stock indices

  • Introduction to derivatives
  • Futures and options on stock indices
  • Trading strategies with futures
  • Trading strategies with options
  • The fall of Barings Bank
  • Introduction to FTS Trading Case RE3

Session 4: Option trading strategies

  • Option sensitivities: Delta, Gamma, Theta, and Vega
  • Exposure to the risk factors
  • Delta hedging & dynamic trading strategies

Session 5: Bond and interest rate markets

  • Trading Case #2: FTS Trading Case RE3
  • Bonds and interest rates
  • The money market
  • The market for government bonds
  • Auctions and secondary market
  • Swaps, Caps, Floors, and Swaptions
  • The Orange County Case
  • Introduction to FTS Trading Case BO3A

Session 6: Commodity and currency markets

  • The commodity markets
  • The market for commodity derivatives
  • The foreign exchange (FX) markets
  • The market for FX derivatives
  • Trading Case #3: FTS Trading Case BO3A

Session 7: Markets in practice and intermarket analysis

  • Futures markets in practice
  • Mark to market, etc.
  • Introduction to the simulation
  • Intermarket analysis
  • Dynamic trading strategies
  • Introduction to FTS Trading Case FX2

Session 8: Speculative bubbles

  • Overview of market crisis and bubbles
  • Start of simulation
  • Trading Case #4: FTS Trading Case FX2

Session 9: Alternative investments

  • Alternative investments
  • Hedge Funds
  • Introduction to FTS Trading Case GC2

Lession 10: Risks and risk management I

  • Risk management part I
  • Credit risk and the structured credit market
  • Trading Case #5: FTS Trading Case GC2
  • Introduction to FTS Trading Case ST1 and ST2

Lession 11: Risks and risk management II

  • Risk Management Part II
  • Other types of risk
  • Organization of a Trading Room
  • Trading Case #6: FTS Trading Case ST1 and ST2

Lession 12: Synthesis and student presentations

  • Synthesis and student presentations

The lessons will be fitted to the hours available.

Teaching Methods
In this course regular class lectures are complemented by assignments, trading cases and a trading simulation:

• Technical Analysis
• Option Trading Strategies
• Hedging option positions
Trading Cases
• IN2 at session 2, on trading based on analysts info and linking to Excel
• RE3 at session 4, on options and arbitrage strategies
• BO3A at session 6, on bond pricing, yield curve and fixed income arbitrage
• FX2 at session 8, on foreign exchange trading
• GC1 at session 10, on trading both bonds and stocks
• ST1 and 2 at session 11 or 12, on hedging/risk management
Trading Simulation - duration of 4 weeks
• Intro at session 7
• Hand in preliminary report at session 8
Further Information

The course is normally taught at HEC Montréal. Hence, the students must be flexible with respect to the prerequisites. Also, the course content might change if appropriate.


· Valdez, Stephen. An introduction to global financial markets, McMillan Press Ltd., London, 2000. (Highly recommended reading)

· Murphy, John J. Technical Analysis of the financial markets, New York Institute of Finance, 1999

· Other useful texts and documents may be referred to during the course

· User manual for the FTS trader software

· Other material