The coursepack for this course will closely follow the in-class lectures. In a sense, the coursepack is intended to free the student from the burden of taking copious notes; the instructor would prefer to focus more on the content of the lecture material. Many students in the course will use the Coursepack as their primary text (a few may use the Coursepack as their only set of readings, though this is not recommended). There will be many exercises and problems in this coursepack. Students should be certain to understand all relevant readings in the Coursepack and be able to work through all relevant exercises.

Students requiring review in mathematics or elementary finance should do so before the second week of the term (This is important). Comfort with all of the material in Chapters 2 through 6 of the Elementary Mathematics Review will be essential to this course. In addition, material covered in an introductory financial management course will be necessary for keeping up with the course. Material related to introductory finance may be obtained through Chapters 4 through 6 of the Elementary Mathematics Review . Material in Chapters 7, 8 and 9 of the Elementary Mathematics Review might be helpful later in this course. End of chapter solutions are provided as well. Finally, many students will find readings that may be added from time-to-time on the Additional Readings page to be helpful for exam preparation or otherwise interesting. A separate page for exam preparation may also prove quite useful. There are links to sample exams as well.

The material below is provided in *.pdf format which can be downloaded by selecting the appropriate links. After downloading, you will need to access this material with Adobe Acrobat Reader . If you do not have this program, it can be downloaded without cost by linking to Adobe's site , selecting the "Get Acrobat Reader link" and following instructions. Feel free to report any difficulties to or obtain any needed assistance from John Teall .
 
 

I.          INTRODUCTION TO SECURITIES TRADING AND MARKETS
    A.        Trades, Traders, Securities and Markets
    B.        Securities Trading
    C.        Bargaining
    D.        Auctions
    E.         Introduction to Market Microstructure
    F.         Orders, Liquidity and Depth
    G.         Day Trading
 

II.        MARKETS AND TRADING PROCESSES                   
    A.        Exchanges and Floor Markets             
    B.        Over the Counter Markets and Alternative Trading Systems 
    C.        The Decline of Brick and Mortar
    D.        Crossing Networks and the Upstairs Markets
    E.        Fixed Income Securities and Markets                
    F.        Quotation, Inter-market and Clearing Systems
    G.        Brokerage Operations
    H.        Fixed Income Securities and Money Markets
     I.        Markets around the World

III.       INSTITUTIONAL TRADING
    A.        Institutions and Market Impact
    B.        Registered Investment Companies
    C.        Unregistered Investment Companies
    D.        Best Execution, Execution Costs and Price Improvement
    E.         Algorithmic Trading
    F.         Dark Pools
    G.        Stealth and Sunshine Trading
    H.        High Frequency Trading
    H.        Flash Trading and Sponsored Access

V.    INFORMATION, TRADING AND SPREADS
    A.    Information and Trading
    B.    Noise Traders
    C.    Informed and Uninformed Traders
    D.    Adverse Selection and Decomposing the Spread
    E.    Prediction Markets

VI.    RANDOM WALKS, RISK AND ARBITRAGE
    A.     Market Efficiency and Random Walks
    B.     Risk
    C.     Arbitrage
    D.     Limits to Arbitrage
             Appendix A: Return and Risk Spreadsheet Applications
             Appendix B: A Primer on Black-Scholes Option Pricing
             Appendix C: Estimating Implied Black-Scholes Volatilities 

VII.     ARBITRAGE AND HEDGING WITH FIXED INCOME INSTRUMENTS AND CURRENCIES
    A.        Arbitrage with Riskless Bonds
    B.        Fixed Income Hedging
    C.        Fixed Income Portfolio Immunization (As Time Permits)
    D.        Term Structure, Interest Rate Contracts and Hedging (As Time Permits)

VIII.    ARBITRAGE AND HEDGING WITH OPTIONS
    A.                Derivative Securities Markets and Hedging
    B.                 Put-Call Parity
    C.                 Options and Hedging in a Binomial Environment
    D.                The Greeks and Hedging in a Black-Scholes Environment (As Time Permits)
                Appendix A: The Binomial Model: Additional Considerations
                Appendix B: Deriving the Black-Scholes Model 

  X.      THE MIND OF THE INVESTOR
    A.        Rational Investor Paradigms
    B.        Prospect Theory
    C.        Behavioral Finance
    D.        Neurofinance: Getting into the Investor’s Head
    E.        The Consensus Opinion: Stupid Investors, Rational Markets?

 
XI.      MARKET EFFICIENCY
    A.                Weak Form Efficiency
    B.                 Testing Momentum and Mean Reversion Strategies
    C.                 Semi-Strong Form Efficiency
    D.                The Event Study Methodology (As Time Permits)
    E.         Strong Form Efficiency and Insider Trading
    F.         Epilogue 

XII.    TRADING GONE AWRY (As time permits)
    A.        Illegal Insider Trading 
    B.        Front Running and Late Trading           
    C.        Bluffing, Spoofing and Market Manipulation   
    D.        Payment for Order Flow
    E.        Fat Fingers, Hot Potatoes and Technical Glitches   
    F.        Rogue Trading and Rogue Traders