4 Capital Market, Money Market and Foreign Xchange Mar

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FINANCE

SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT


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Unit IOverview of Capital Market: Market of securities: Stock exchange New Issue Market their nature, structure, functioning and limitati

Trading of securities: equity and debentures/ bonds. RegulaMechanism: SEBI and their guidelines. Investor protection.

Unit II

Valuation of Equity: Measures of risk and return: calculation, tradesystematic and unsystematic. Equity valuation models. Analysiequity Investment: Technical and fundamental approaches- compindustry and economy analysisNature of stock market: EMH and its implications for investmdecision.

Unit IIIOther Instruments: Bonds: nature, valuation. Bond theorem; Term

structure of interest rates. Duration. Derivatives:Options and futures: meanings, trading, valuation

Unit IVPortfolio analysis and selection: Portfolio: concept, risk and retBeta as a measure of risk: calculation.Selection of portfolios; Capital market theorem and Arbitrage pritheory.Portfolio Management and Performance evaluation: Performa

evaluation of existing portfolio; Sharpe and Treynor measures. Finalternatives and revision of portfolio; Portfolio management mutual fund industry

SUGGESTED READINGS:

1. Chandra P- Investment Analysis and Portfolio ManagementTata McGraw-

2004.2. Fischer and Jordan- Security Analysis and Portfolio Management(Prentice-Hall, 6th edition) 1996.3. Ranganatham- Investment Analysis and Portfolio Management(Pearson Education)4. Pandian P- Security Analysis and Portfolio Management (Vikas)


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INSURANCE MANAGEMENT

Unit IIntroduction to Risk Management :

a. Identifying types of risks b. Management of Translation. c. transaction and econo

Exposure d. Quantifying Risk and Hedging techniques. e. Internal and ExternalTechniques viz Netting, Matching, Leading and Lagging. f. Price variation. g. Short

Term borrowing.

h. Pricing in Foreign Currency. i. Assets Liability Management.

UNIT IIInstruments of External techniques of Risk Management :

a. Forwards b. Futures c. Swaps d. Options e. Forward Rate Agreement

f. Caps g. Collars h. Floors and their applications i. Pricing techniques

j. Operational aspects.

UNIT IIILife Insurance : a. Principles of Life Insurance b. Financial Planning and Insuran

Life Insurance Products d. Pensions and Annuities e. Risk Assessment & Underwr

f. Premium Setting g. Product Development h. Design and Evaluation i. Reinsuran

Claims Management k. Marketing and Servicing l. IT Applications m.Tax planni

Legal Frame

UNIT IVGeneral Insurance : a. Principles of General Insurance b. General Insurance Produ

(Fire, Motor & Health) c. Terminology d. Perils e. Clauses and Covers f. Risk

Assessment & Underwriting g. Product Design h. Development and evaluation i. Lo

prevention and control j. Claims Management k. Reinsurance l. Marketing and

Servicing m. IT applications n. Legal framework and documentation

Books Recommended:

1. Options and Futures- Hull

2. International Finance- A.V. Rajwade

3. International Finance- P.G. Apte

4. Commodity Futures & Options- George Kleiman

5. Principals of Insurance- Holioke

6. Principals of Insurance- Mishra


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MANAGEMENT OF FINANCIAL INSTITUTIONS

Unit IFinancial Institution & Economic Growth in India, Types of FinanInstitutions, Money Market Institutions with its tools, Capital MaInstitutions with its tools.

Unit IICentral Banking: RBI Role and functions Monetary Policy- tooeffectiveness. Commercial banking structure of Banking system in India, functiCommercial Banks, Management of Capital Funds in Commercial Banks.

Unit IIISecuritization: concepts, nature, scope and their implications. DFIndia ( IDBI, ICICI, IFCI, NABARD, RRBs), State Level Instituti

NBFCs.Insurance services: Life and General. Premium. Risk covered. benefits.Mutual funds investment avenues. Returns and instruments.

Unit IVLeasing and Hire Purchase: Industry. Size and scope. Parties involv

Types of lease Hire purchase and lease- differences and implicatioOthers: Factoring, Forfeiting, Discounting and Re Discounting Of B

Consumer Credit and Plastic Money.

SUGGESTED READINGS:

1. Fabozzi- Foundations ofFinancial Markets and Institutions (PearsonEducation,

3rd edition)2. Khan M Y- Financial Services (Tata McGraw-Hill) 1998.3. Machiraju H R-Indian Financial System (Vikas, 2004)4. Bhole L M-Financial Institutions and Markets (Tata McGraw-Hill, 3rdedition, 2003)5. srivastava, R.M:- management of Financial institutions (HimalvaPub)


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INTERNATIONAL FINANCIAL MANAGEMENT

Unit IGlobal financial environment: Overview: IMF: objectives, functiEuro currency market. Money market, capital market: Relationwith domestic markets. Role of Finance Manager in the Glcontext. Balance of Payments: understanding, analysis interpretation. Foreign exchange Market: Nature, structure, typestransactions, exchange rate quotations, spot and forward; Arbitra

Foreign exchange market in India: nature, structure, operations, limitations.

Unit II

Exchange rate determination, forecasting, theories: Purchasing poparity, Interest rate parity etc. Foreign Exchange risk exposure:Typerisk: Economic and translations. Accounting treatment: tax treatmof gains and losses. Exchange Risk reduction: techniques: applications their limitations. Hedging, swaps, futures, options. Relationship of Mmarket and foreign exchange market

Unit IIIFinancial structure and International financing: Optimal financial structure

MNE and their foreign subsidiaries; Eurocurrency markets; Internatidebt markets; Management of interest rate risk: interest rate opticurrency options etc.

Unit IVForeign investment decisions: Multinational capital budgetInternational portfolio theory and diversification; Repositioningfunds; Working capital management in MNEFDI and FII in India:

SUGGESTED READINGS:

1. Levi,Maurice D , International finance : The markets and Financial Managemof Multinational Business , McGraw Hill


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3. Kolb, Rebert W, The International and Finance, New Delhi Anmol,

4. Bhalla,V.K, managing International Investment and Finance, New Delhi Anm

5. Eaker,Mark,Fobozzi, Frank and Grant, Dwight, International Corporate Fina

for Worth: Dryden Press.

6. Baker, James C, International Finance : Management , Markets, and

Institution ,New Jersey , Printice Hall.

CORPORATE TAX PLANNING

Unit INature and scope of planning :Nature, objectives of Tax management . Assessme

tax. Financial year. Assessee- Type Residential status Non-resident Indians.

Unit IITax on individual income : Salaries. Standard deduction . Valuation of perquisites

calculation of tax etc. Tax deductible at Source .

Unit IIICorporate income Tax : Tax concession and incentives for corporate decision .Ta

planning for depreciation; Treatment of losses & unabsorbed items : carry forward a

set off losses .Tax and business reorganization : merger and amalgamation .Tax

appeals: Revision & Review

Unit IVWealth Tax on closely held companies; valuation of assets ; Filing of returns ;

Assessment ; Appeals; Review; Revision and Rectification

Central Excise Act 1994 and excise planning ; customer protection Act 1962 and

customers planning (working knowledge is required for these)

SUGGESTED READINGS

1. Bhatia H L Public finance (vikas) 1999,20th ed.

2. Lakhotia R N- How to save wealth Tax (vision Book) 2001, 9th ed.

3. Palkhiwala- Income Tax (tripathi publication )

4. Prasad Bhagwati- income Tax law & practice (vishwa prakashan) 1997 , 23rd

5. santraram R-Tax planning by reports(taxman)

6. singhania VK- Direct Taxes, law & practice (taxman) 2002..


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DERIVATIVE MANAGEMENT

Unit 1: Introduction

Derivative Securities,

Some Important Concepts in Derivative Markets,

The Role and Some Criticisms of Derivative Markets.

Unit 2: Options & Option Pricing

Options Markets,

Basic Option Strategies,

Advanced Option Strategies.

Principles of Option Pricing,

Option PricingThe Binomial Model, The Black-Scholes Model

Unit 4: Forwards and FuturesForward and Futures Markets,

Pricing Forwards and Futures,

Futures Hedging.

Unit 5: Swaps and Interest Rate Derivatives

Interest Rate Swaps

Currency Swaps

Interest Rate Forwards and Options

SUGGESTED READINGS:

1. David F Deresa- Current Derivatives: Pricing Theory, Exotic, Hedging Applica2. Robert W. Kolb- Financial Derivatives


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THIRD YEAR - SEMESTER V

Global Capital Markets

Regulation of Securities Markets

Insurance (Fund) Management

Derivatives Markets

Foreign Exchange Markets

Portfolio Management

Project - I

GLOBAL CAPITAL MARKET

UNIT -I : IMPACT OF GLOBALISATION ON THE CAPITAL MARKETS

Growing International Integration

Role of Media & Technology in Capital mobility

Diversification benefits of global investment

UNIT -II : GLOBAL (INTERNATIONAL BOND MARKET)

Domestic Bonds, Euro Bonds & foreign Bonds

Participants in the global bonds markets.

Credit rating agencies & their role

Procedure for issuing Euro Bonds

UNIT -III : GLOBAL EQUITY MARKETS

Major stocks markets of the world

Emerging stock markets

International Equity Trading - Multiple ListingDepository receipts

UNIT -IV : OBSTACLES TO INTERNATIONAL INVESTMENTS

Information Barriers

Foreign Exchange Risk

Political risks

Taxation

Other Regulatory Barriers

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REGULATION OF SECURITIES MARKET

UNIT -I : OVERVIEW OF INDIAN SECURITIES MARKET

Nature of Savings & Investment

Profile of Indian Investor

Factors affecting Investments decision of an Indian Investor

UNIT -II : NEED FOR REGULATING SECURITIES MARKETS IN INDIA

Protection to retail investor

Vanishing companies of nineties

Pricing of IPO's & possible economic offences

UNIT -III : LEGISLATIONS GOVERNING THE SECURITIES MARKETS

CompaniesAct 1956

Securities contracts Regulation Act

SEBI Act

Depositors Act

InsuranceActSpecial regulatory requirements of derivatives market

UNIT-IV : REGULATORY BODIES

Department of Company affairs

Department of Economics affairs

SEBI

RBI

IRDA (www.irda.gov.in)

Need for self regulation

INSURANCE (FUND) MANAGEMENT

UNIT -I : INTRODUCTION

The Insurance Mechanism

Fundamental Principles of Insurance

Importance of life & general insurance

Growth of evolution of insurance business in India with specific reference to post liberalization

UNIT -II : IDENTIFICATION OF 'RISK' TO BE INSURED

Sources of Risk

Risk Identification"Insurance Policy" as a financial product

UNIT -III : ORGANISING AN INSURANCE BUSINESS

Types of Organizations

Role of IRDA

Procedure for setting up an insurance business

UNIT-IV : OPERATIONAL ASPECTS OF INSURANCE BUSINESS

Marketing insurance products including E-Marketing

Actuarial role

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DERIVATIVE MARKETS

UNIT-I : NATURE OF FINANCIAL DERIVATIVES INCLUDING FUTURES & OPTIONS

Characteristics of Derivatives, Underlying assets (Equity Bonds/Loans, Foreign currency & Commodity),

Need for Derivatives, Types of Derivatives & Comparison between them, Forwards/Futures/Options,

Participants in Derivatives Market (Hedgers, Speculators,Arbitrageurs).

UNIT-II : PRINCIPLES OF TRADING & HEDGING WITH INDEX FUTURES

Terminology - Spot, future price, contract specifications, contract cycle, expiry date, settlement date, basis,

mark to market, Contract specification for BSE Sensex, Tick date, types of orders, trading strategies, Hedging

Strategies, Initial, Maintenance Margins, Executing & Clearing, Execution, Matching confirmation, Clearing

Mechanism,Settlementprice,Settlementcycle,cashvs.Physicaldelivery,"OpenInterest"&"TradingVolumes"

UNIT- III : PRINCIPLES OF TRADING & HEDGING WITH OPTIONS

Terminology - call, put, writer, buyer, premium, intrinsic value, time value, expiry date, settlement date,

stock price, ATM, OTM & ITM, The Greeks -(Delta, Gamma, Theta, Vega)

UNIT - IV : RISK MANAGEMENT SYSTEMS & PROCEDURESTypes of Risks (Counter -party or credit risks, Market or price risks, liquidity risks, Legal & regulatory risks,

Operating risks), Risk Identification & a measurement, Methods of risks control (Position Limits, VAR,

Margins, operating Procedures & systems etc) Separation of trading, settlement, accounting & risk control

functions, Internal control structure & Management Information System, Regulatory & external reporting.

FOREIGN EXCHANGE MARKET

UNIT-I : INTRODUCTION TO INTERNATIONAL FINANCIAL SYSTEM & FOREIGN EXHANGE MARKET

Important terms & concepts

Foreign Exchange & Euro currency

Foreign Exchange brokers & mechanism of foreign exchange transfers

CHIPS (Clearing House Interbank Payments Systems), SWIFTS (Society for Worldwide Interbank

Financial Telecommunications).

UNIT -II : EXCHANGE RATE SYSTEMS

Gold & Bretton woods systems

Fixed & Floating exchange rate system

Adjustable peg system

Crawsling peg exchange rate system

Snake in the tunnel system

Exchange rate mechanism in India

UNIT -III : FOREIGN EXCHANGE MANAGEMENT

The risks element in foreign exchange markets

Need & Importance of foreign exchange management

Methods adopted (spot & forward, arbitrage, cross currency deals, swaps, options & futures)

UNIT -IV : FOREIGN EXCHANGE MARKET IN INDIA

Impact of liberalization & globalization in India's foreign exchange market

RBI's role in directing & controlling foreign exchange market

The pros & cons of full convertibility of Indian currency

FEMS & the Indian foreign exchange market

Indian multinationals & their impact on foreign exchange

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Portfolio Management

Unit- I : Introduction

A venues and Mult5iple Investments.

Need for designing and Investment Portfolio.

Relevance of Portfolio Management in different sectors of financial markets

Popularity of equity portfolio management services

Unit- II : Portfolio theory and application

Markowitz portfolio theory

Efficient frontier and investor utility

The Capital Asset Pricing Model - Expected Return and Risk- Security Market Line (SML).

Arbitrage pricing theory.

Capital Market Line

Unit - III : Performance Evaluation of a Portfolio

Trenyor Portfolio Performance Measure - Optional

Sharpe Portfolio Performance Measure - Optional

Factors affecting performances measures,

Reliability of Performance measures.

EMH ( Efficient Market Hypothesis).

Unit - IV : Performance Management Services in India.

Portfolio management service providers in India.

Procedure for setting up portfolio management services.

Evaluation of present scenario and estimation of future prospects.

Regulation of portfolio management services.

Books for Reference

1.

2.

3.

4.

5.

6.

7.

Portfolio Management, S. Kevin, Prentice Hall, 2004.

Pioneering, Portfolio Management, David F. Swenson, Free Press.

Taming Risk, Mark Fisher, Euro Money Books, 2005

Portfolio Management Formulas, Ralph Vince, John Wiley & Sons, 1990

TheArt of Investing and Portfolio Management, Mc-Graw Hill Professional 2004.

Active Portfolio Management, Richard Grin hold and Ronald Kahn, Irwin, 1999

InvestmentAnalysis and Portfolio Management Student Self Study Problems Manual Frank K.Reilly

and Keith C.Brown South Western College Publishing, 1999

Project - I Report Writing

Documents

4 Capital Market, Money Market and Foreign Xchange Mar