Introduction to Law & to Finance
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This course is designed to introduce you to the basic concepts of finance and law. It is recommended that you study this as your first course.
Whilst the course does not require previous study of the two subjects, it will add to your knowledge if you have studied an undergraduate course in either of the two disciplines. This course intends to be an entry point in the world of finance and the law upon which finance is based. You will learn some of the basic principles of law and of financial techniques as foundations for the detailed study of finance and financial law that you will study in subsequent courses of the MSc or Postgraduate Diploma programme.
The thrust of the academic programme Finance & Financial Law is the close relationship between law and financial economics. This course is designed to emphasise this relationship and draw your attention to the fact that legal rules and principles play an important role in the structure and operations of financial markets.
You will receive a looseleaf binder containing eight 'course units'. The units are carefully structured to provide the main teaching, defining and exploring the main concepts and issues, locating these within current debate and introducing and linking the further assigned readings. The unit files are also available to download from the Online Study Centre.
David Barker and Colin Padfield, (2007) Law Made Simple, Twelfth edition, Made Simple Books/Elsevier Science.
James A. Holland and Julian S. Webb, (2006) Learning Legal Rules - A Student's Guide to Legal Method and Reasoning, Oxford University Press.
You will receive a compilation of further readings: recently published articles or seminal writings, which augment and illustrate the main text.
Online Study Centre
You will have access to the OSC, which is a web-accessed learning environment. Via the OSC, you can communicate with your assigned academic tutor, administrators and other students on the course using discussion forums. The OSC also provides access to the course Study Guide and assignments, as well as a selection of electronic journals available on the University of London Online Library.
Objectives and learning outcomes of the course
When you have completed the study of this course and its readings you will be able to:
- Demonstrate the importance of law as a component of vibrant and successful markets, particularly financial markets
- Analyse the importance of the law of contracts and the law of non-contractual liability for the smooth functioning of financial markets
- Discuss the basic principles, sources and methods of law
- Identify and discuss the points of contact between law and market behaviour of investors, banks, corporations and other players in national and international financial markets
- Use basic mathematical formulas that are used in financial decisions
- Discuss concepts of returns, risk, and time, which underpin rational financial decisions and interact to determine prices of financial securities
- Explain how returns, risk, and time are represented by mathematical formulas used in finance
- Discuss how concepts of probability relate to risk and how they are represented by statistical formulas used in finance
Scope and syllabus
Part 1: Introduction to Law
Unit 1: Introduction to Law
- 1.1 The Functions of Law
- 1.2 Subject Areas of Law
- 1.3 Jurisdictions of the World and ‘legal families’
- 1.4 Legal Method and Legal Reasoning
- 1.5 The Relationship between Law and Equity
- 1.6 Finding Law
- 1.7 Summary
Unit 2: Sources of Law and How to Use Them
- 2.1 Introduction to the Sources of English Law
- 2.2 Precedent and the Court System
- 2.3 Reading Cases
- 2.4 Statutory Law and Statutory Interpretation
- 2.5 The Role of the European Union Law
- 2.6 Summary
Unit 3: Introduction to Contract Law
- 3.1 Unit Introduction
- 3.2 Financial Markets and the Law of Contracts
- 3.3 Freedom of Contract
- 3.4 Essentials of a Valid Contract
- 3.5 Offer and Acceptance
- 3.6 Consideration
- 3.7 Formalities
- 3.8 Terms and Conditions
Unit 4: Introduction to Property Law
- 4.1 Unit Introduction
- 4.2 Financial Markets, Property Rights and the Law of Property
- 4.3 Property Rights and the Fundamentals of Property Law
- 4.4 The Transfer of Property Rights and Obligations
- 4.5 Introduction to the Concept of Trust
- 4.6 Equity and Equitable Remedies
- 4.7 Agency and Fiduciary Duties
- 4.8 Summary
Unit 5: Introduction to Tort Law
- 5.1 Unit Introduction
- 5.2 What is a Tort?
- 5.3 The Function of the Law of Torts and Financial Markets
- 5.4 Negligence
- 5.5 Economic Loss
- 5.6 Misrepresentation
- 5.7 Summary and Conclusion
Part 2: Introduction to Finance
Unit 6: Introduction to Finance - Returns, Time and Risk
- 6.1 Introduction
- 6.2 Returns, Time and Risk
- 6.3 Returns and the Price of Financial Securities
- 6.4 Compound Interest
- 6.5 Discounting and the Yield to Maturity
- 6.6 Returns on Equities
- 6.7 Crunching the Numbers
- 6.8 Conclusion
Unit 7: Returns and Risk
- 7.1 A Price for Risk
- 7.2 Risk of What?
- 7.3 Probability Distributions - the Basis for Measuring Risk
- 7.4 The Real World - Volatility
- 7.5 Downside Risk
- 7.6 Some Criticisms of Risk Measures Based on Standard Deviations
- 7.7 Risk and Returns - the Equity Premium
- 7.8 Conclusion
Unit 8: Interpreting Financial Sector Data
- 8.1 Introduction - Cause and Effect
- 8.2 Is there a Correclation of Bank Rate and Bond Yield?
- 8.3 Do Countries' Legal Systems Affect the Development of their Financial Systems?
- 8.4 Understanding the Use of Regression Analysis
- 8.5 Interpreting the Regression Results of La Porta, Lopez-de-Silanes, Shleifer and Vishny
- 8.6 Conclusion