Financial Markets (F)

Course content

This course examines the financial markets from a Micro perspective. When traders operate in the financial market, how do they arrive at the transactions prices? How is the traders’ dispersed information incorporated into these prices? What determines the liquidity and depth of an asset market? What is the optimal behaviour for traders in financial markets? Why do bubbles and crashes arise? Do the institutional details of the exchange influence this price formation process? If so, how should exchanges and regulators ideally design the rules of trading? Is there a role for market making, should the market be fully transparent, should insider trading be permitted, should transactions be taxed, and is high-frequent trading good or bad for the market?

Financial economics addresses these and related questions in the field of financial markets’ microstructure. This course seeks to give a broad introduction to the field through a textbook covering theory, evidence and policy. It also provides deeper insight on topics of current interest on the basis of selected current research papers. The lectures will often draw on recent media clippings of relevance for the topic.


MSc programme in Economics – elective course

The course is part of the MSc programme in Economics, Financial line,  symbolized by ‘F’.

MSc programme in mathematics-economics

Learning outcome

 A strong analytical framework now provides a good understanding of Financial Market issues. Nevertheless, research in this area still leaves many questions open for further investigations. This course partly gives participants a review the facts on financial markets, partly presents the key theoretical models, and partly addresses how the models are applied to the important issues.

After completing the course, the student should be able to:


  • Know about types of financial markets and their characteristics

  • Know the standard theoretical models used to model financial markets

  • Know about current issues in the financial markets literature


  • Set up financial market problems as game-theoretic models

  • Analyze price formation in different types of financial markets and derive results on measures such as liquidity and market depth

  • Analyze the pros and cons of different market structures seen from the perspectives of different market participants


  • Explain and discuss key theoretical concepts from academic articles, as well as discuss their interpretation

  • Apply the most relevant theoretical apparatus to analyze case-based problems


Mostly lectures covering the syllabus with a view towards accomplishing the course goals. Supplemented by problem sets.

Thierry Foucault, Marco Pagano and Ailsa Röell: “Market Liquidity: Theory Evidence and Policy,” Oxford University Press, 2013. 439 pages.

Various papers that will be announced later.

The course builds mainly on basic Finance, such as may be acquired in the course Corporate Finance and Incentives. We also employ the modelling skills from the bachelor’s courses in Micro.

2 hours lectures 1 to 2 times a week from week 36 to 50 (except week 42).

The overall schema for the Master can be seen at https:/​/​​economics_ma/​courses/​CourseCatalogue-E17/​Courseschema/​Pages/​default.aspx

Timetable and venue:
To see the time and location of lectures please press the link under "Se skema" (See schedule) at the right side of this page. E means Autumn.

You can find the similar information partly in English at
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-E17; [Name of course]””
-Select Report Type: “List – Weekdays”
-Select Period: “Efterår/Autumn – Weeks 31-5”
Press: “ View Timetable”

7,5 ECTS
Type of assessment
Written assignment, 48 hours
individual take-home assignment.
The exam assignment is given in English and can be answered in English or in Danish. Language must be chosen at the course or exam registration.
All aids allowed
Marking scale
7-point grading scale
Censorship form
External censorship
if chosen by the Head of Studies.
Criteria for exam assessment

Students are assessed on the extent to which they master the learning outcome for the course.

To receive the top grade, the student must be able to demonstrate in an excellent manner that he or she has acquired and can make use of the knowledge, skills and competencies listed in the learning outcomes.

Single subject courses (day)

  • Category
  • Hours
  • Lectures
  • 42
  • Preparation
  • 116
  • Exam
  • 48
  • English
  • 206