Office: C 315
Phone:(0755)2603-3320
Email: weicen@phbs.pku.edu.cn
Financial Markets
Course Description:
The goal of this course is provide an introduction into the workings of financial markets. The
course will discuss the basic role of financial markets, the types of financial assets and how they
are traded. We will introduce a number of technical tools for valuing risk, pricing financial assets
and creating portfolios. Finally, we will employ these insights to discuss issues of broader
relevance for the macro economy, with special emphasis on the current financial crisis.

Required Textbook:
The main textbook for the course is ?°Investments?± by Zvi Bodie, Alex Kane and
Alan J. Marcus, McGraw-Hill/Irwin, 9th edition (2010), ISBN 978-0073530703.
This book is an excellent source of how modern financial markets work and
explains the basic tools that financial economists use to analyze them. A large
majority of the materials covered are also included in the 8th edition (2008), 7th
edition (2006) or 6th edition (2004) of the book, which are more affordable.
Prerequisites:
I will distribute a math handout in our first class to help you review some of the mathematical
concepts and tools that will be used in class. I strongly recommend that you work through these
on your own to refresh your math skills.

Composition of Grade:
16 % Financial news analysis presentation
24 % Problem sets
30 % Midterm
30 % Final exam
There will be no opportunities for extra credit. If at any point during the semester you face
circumstances which prevent you from attending lecture, handing in problem sets on time,
making presentations and/or participating in quizzes or exams, please contact me as soon as
possible to discuss ways to manage the situation. There is little that can be done after an
unsatisfactory grade has been assigned.

Class Preparation and Participation:
Students are expected to be prepared for each lecture by studying the textbook chapters as
indicated below. Furthermore, you are expected to follow our regular financial news discussion
and analysis in class and online to connect the theoretical concepts that we are studying to what
is going on in financial markets day-to-day. Preparing all of these materials will help you to
actively and effectively participate in classroom discussions. This means regular class
attendance is an expectation. You will be responsible for all the preparatory materials in your
problem sets, quizzes and exams.

Financial News Analysis Presentation:
One of the main goals of our class is to actively follow actual events in financial markets. At the
beginning of each class, we will review and discuss the financial news and developments since
the previous class. To this goal, I will sign up a team of two students for each class to prepare a
short presentation (approx. 10 ¨C 12 min).

In your financial news presentation, (i) spend some time to discuss and analyze how markets
performed since our last class and (ii) pick two to three specific news items that are closely
related to topics we have covered in a recent lecture and present some in-depth research on these
items. For this, read all related news articles from several different financial news sources (such
as Financial Times, Wall Street Journal, Bloomberg.com, MarketWatch.com, Yahoo! Finance,
Google finance etc.) and compile a brief summary, analysis and comment. You should present
this to class and submit a summary report with around 150 ¨C 200 words per presenter or 300 ¨C
400 words per pair.

Problem Sets:
There will be six mandatory problem sets throughout the semester, each of which will be given
equal weight. The problem sets will help you to work through the materials covered in class and
will be useful in your preparation for the mid-term and final exam. Therefore I assign an
important weight of the final grade to your performance on problem sets.
If you will have to miss a class, please turn in your problem set by slipping it under my office
door before the beginning of class. If you are late, I will drop 33% of the points if you hand it in
after class the same day and 50% of the points if you hand it in the day after its due date. Later
submissions will not receive any credit.

Quizzes, Midterm and Final Exam:

There will be one midterm and one final exam. The material covered by the final exam will be
cumulative, but with special focus on the most recent materials. If you fail to take an exam, you
will receive a zero score, no exception will be made.
You are responsible for all material in the relevant chapters of the textbook (see below), for the
topics we discussed in our financial news analysis and for what were covered in my lectures. If
you miss any lectures, please make sure that you copy the notes of one of your colleagues.
Course Evaluations:

At the end of the semester, please let me know what you liked and what you disliked about this
class by taking advantage of the University's course evaluation system. I really appreciate your
feedback ¨C incorporating your suggestions will help me in updating the course for future
generations of students.

Students with Disabilities:
Students with disabilities are required to get in touch with me within the first three weeks of
classes and furnish the required documentary evidence. I will be happy to accommodate your
needs.

Academic Integrity:
As a student you are responsible for upholding academic integrity standards for this course. It is
very important for you to be aware of the consequences of cheating, fabrication, facilitation, and
plagiarism. For more information on the Code of Academic Integrity or the Student Honor
Council, please visit http://www.gsm.pku.edu.cn/UserFiles/yjssc2007.doc
Tentative Course Outline (details will change over the course of the semester):

Week Date Topics Textbook Notes
8/30 Introduction Ch. 1
1
9/1 Money and Bond Markets Ch. 2
9/6 Equity Markets Ch. 2
2
9/8 Security Trading Ch. 3 Problem set 1
9/13 Mutual Funds Ch. 4
3
9/15 Risk/Return in Financial Markets Ch. 5 Problem set 2
9/20 Dealing with Risk Ch. 6
4
9/22 Diversification Ch. 7 Problem set 3
9/27 CAPM Ch. 9
5
9/29 Mid term Mid term
National Day Break
10/11 Efficient Markets Hypothesis Ch. 11
6
10/13 Bond Prices and Yields Ch. 14 Problem set 4
10/18 Mortgages -
7
10/20 Term Structure of Interest Rates Ch. 15 Problem set 5
10/25 Options Ch. 20
8
10/27 Futures and Swaps Ch. 22 Problem set 6
11/1
Futures, Swaps and Risk
Management
Ch. 22
9
11/3 The Financial Crisis
11/6 Final Exam Final Exam