Introduction to Law and Finance

This module, Introduction to Law and to Finance, is designed to introduce you to the basic concepts of finance and law. It does not require previous study of the two subjects although it will add to your knowledge if you have studied an undergraduate module in either of two disciplines. This module intends to be an entry point in the world of finance and the law upon which finance is based. It is designed to enable you to 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 modules of the MSc degree.

This module aims to go further than presenting the basics of law and of financial techniques, for the thrust of the academic programme on Finance and Financial Law is the close relationship between law and financial economics. This module 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.

Our intention is that after successfully completing the module, students from different backgrounds will understand the basic principles of law and how they interact with finance. We will try to remind you of that close relationship and enhance your understanding of law by way of real examples as to how law affects the operation of financial markets.

Learning outcomes

When you have completed the study of this module 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.

Tuition and assessment

Students are individually assigned an academic tutor for the duration of the module, with whom you can discuss academic queries at regular intervals during the study session.

You are required to complete two Assignments for this module, which will be marked by your tutor. Assignments are each worth 15% of your total mark. You will be expected to submit your first assignment by the Tuesday of Week 6, and the second assignment at the end of the module, on the Tuesday after Week 10. Assignments are submitted and feedback given online. In addition, queries and problems can be answered through the Virtual Learning Environment.

You will also sit a three-hour examination on a specified date in September/October, worth 70% of your total mark. An up-to-date timetable of examinations is published on the website in July each year.

Study resources

• Study guide: The module study guide is 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 assigned readings.
• Key texts: 
  • Barker D (2014) Law Made Simple, 13th Edition, Routledge.
  • Holland J & J Webb (2016) Learning Legal Rules: A Student's Guide to Legal Method and Reasoning, 9th Edition, Oxford University Press.
  • Partington M (2018) Introduction to the English Legal System 2018–2019, 13th Edition, Oxford University Press.
• Readings: Throughout the module you will be directed to study a selection of readings, including journal articles, book extracts and case studies that are of particular relevance and interest to the topics covered in the module.
• Virtual learning environment: You will have access to the VLE, a web-accessed study centre. Via the VLE, you can communicate with your assigned academic tutor, administrators and other students on the module using discussion forums. The VLE also provides access to the module Study Guide and assignments, as well as a selection of electronic journals available on the University of London Online Library.

Study calendar 2022/23
 

Study calendars are subject to change.

Module overview

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 Judicial Decisions as Sources of Law: Precedent and the Court System
• 2.3 Reading Cases
• 2.4 Statutory Law and Statutory Interpretation
• 2.5 European Union Law as a Source of English Financial 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

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 Returns and Time – the Price of Time

• 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 – the Price of 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 Correlation 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

Module samples

• M438 Module Introduction (PDF)
• M438 Specimen Examination (PDF)
• M438 Unit 1 (PDF)

Disclaimer

Important notice regarding changes to programmes and modules