Lecture notes on
                   FINANCIAL MARKETS
                            Marco Li Calzi
                       Dipartimento di Matematica Applicata
                        Universit`a “Ca’ Foscari” di Venezia
                              February 2002
         M. Li Calzi, Lecture notes on Financial Markets
              c
         Copyright 
2002 by Marco Li Calzi
         Introduction
         In 2000, when Bocconi University launched its Master in Quantitative Finance, I was asked
         to develop a course touchingupon the many aspects of decision theory, financial economics,
         and microstructure that could not otherwise fit in the tight schedule of the program. Re-
         flecting this heterogeneity, the course was dubbed “Topics in Economics” and I was given
         a fair amount of leeway in its development.
          Myonlyconstraint was that I had to choose what I thought best and then compress it in
         15 lectures. These notes detail my choices after two years of teaching“Topics in Economics”
         at the Master in Quantitative Finance of Bocconi University and a similar class more aptly
         named “Microeconomics of financial markets” at the Master of Economics and Finance of
         the Venice International University.
          The material is arranged into 15 units, upon whose contents I make no claim of origi-
         nality. Each unit corresponds to a 90-minutes session. Some units (most notably, Unit 5)
         contain too much stuff, reflectingeither the accretion of different choices or my desire to
         offer a more complete view. Unit 7 requires less time than the standard session: I usually
         take advantage of the time left to begin exploring Unit 8.
          I have constantly kept revisingmy choices (and my notes), and I will most likely do so in
         the future as well, postingupdates on my website at http://helios.unive.it/˜licalzi.
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