Target Audience: This course is adequated for any student in the master (she could be an Economics, Engeniering, Matematizians, Fisics or from Business Administration bachelor). Course Language: This course is totally taught in English. No previous courses are necessary.

GENERAL COMPETENCES: Students will achieve the ability to answer new problems, using a large amount of information. They will learn how work in unstable situations, being part of a team or individually. They will also promote their ability of leadership. SPECIFIC COMPETENCES: The aim of this course is to understand the main elements that make up a financial system, including the description of its institutions (European Central Bank), its markets (both monetary and capital) and its various types of assets and instruments. Students will learn and understand: 1. The basic structure, characteristics and functions of a financial system, 2. Financial instruments and transactions, including stocks bonds, deposits, derivatives, and mutual funds. 3. The role of law and regulation of the financial system and how it affects the normal functioning of all institutions, intermediaries and markets. 4. Interpret financial markets in terms of its architecture. 5. The role of active and passive management In this way the students will understand the current state of financial systems including the role of financial institutions, central banks and the various regulators. COURSE DESCRIPTION The content of the program is divided into 8 sessions that cover the main aspects of the financial system. After an introductory track to financial markets the section deals with liquidity aspects. Also we will focus our attention to other financial markets such as Stock Exchanges, Derivatives, Fixed Income and interbank market. When it becomes necessary for each of the markets discussed above products traded and the form and procedure in which these products are created and then traded. Finally, we examine the role of European Central Bank, its monetary policy and regulatory bodies. FACULTY: -Mikel Tapia (Professor, UC3M) -Jorge Yzaguirre (PhD, BME)

Program Session 1: Financial Markets and Instruments: An Introduction I. Introduction and structure: Instruments and Markets How do financial markets work? Transaction cost Types of Markets Session 2: Financial Markets and Instruments: An Introduction II. Special issues: Anonymity, Fragmentation Competition of Financial Markets MiFID Ultra High Frequency Traders Session 3: Liquidity Liquidity: basic concepts Some results: intra and interday regularities Which are the main drivers of Quoted or Effective Spreads? Two approaches to Liquidity First Approach, Martinez Rubio and Tapia (REA, 2004) Second Approach: Næs and Skjeltorp (JFM, 2006) Session 4: ECB, Monetary Policy and Interbank Market. European Central Bank and the Eurosystem. The ECB: Monetary Policy. Quantitative easing (QE). The Covid-19. Interbank Market Repo Market Fixed Income Securities Session 5 & 6: Capital Structure Modigliani Miller Propositions Existence of Corporate Taxes Financial Distress Session 7: Derivatives Introduction Options Futures The Market. Session 8 & 9: Electronic Markets and indexing. Introduction to indexing Active and passive portfolio management Cash and futures index arbitrage Session 10: Exchange Traded Funds Mutual Funds versus Exchange Traded Funds Role of ETF Interactions between cash, futures and ETFs

Students will work in teams, learning to collaborate and organize the information. The professor will present the main theoretical concepts before the students do the assignments. All the session have a practical issue to solve by the teams. 1. Assignment 1 Each team should prepare a power point presentation (ppt) of a financial market. In the presentation, the students should provide useful information about the type of market, trading hours, type of orders, last years volume or liquidity, etc. 2. Assignment 2 Using the data included in San_Min.txt that contains information about the first five levels of the limit order book of Santander on 8th august of 2011. Each team should calculate some liquidity variables and compare their results with the ones that the professor explains in class. 3. Assignment 3. Using the data included in March11 that contains information about volume in shares, number of messages, Quoted spread and dollar depth of 40 stocks listed in Nasdaq. Each team should create some portfolios and compare the results with the ones that the professor explains in class 4. Presentation of Assignment 1 Presentation will evaluate team ability to communicate the main idea of the presentation and to link all concepts and ideas, their ability to answer properly the questions done by the professor and the rest of the class after/during presentation, team members ability to maintain eye contact with audience, seldom returning to notes and finally team ability to identify and accurately explain/use the relevant key concepts.