Finance: Theory vs Practice

Asif Khan, CFA

Deputy Head of Research

BRAC EPL Stock Brokerage

Venue: NSU

Date: March 21st, 2015

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“Theory is when you know

everything but nothing works.

Practice is when everything

works but no one knows why.

In our lab, theory and practice

are combined: nothing works

and no one knows why.”

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Are they at conflict?

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In Finance, theory is important

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In Finance, theory is important

Classrooms are like windows

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Flight to corporate world

FINANCIALNON

FINANCIAL

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Non Financial - Sectors

Unilever

Marico

Nestle

GSK

FMCG Industrials Services

Lafarge

Heidelberg

BSRM

Grameenphone

Robi

Accenture

Others

Square Pharma

Viyellatex

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Non Financial - Roles

Finance and Accounts Strategy and Planning

Treasury Business Analyst

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Financial - Sectors

Banks NBFIs

Insurance

BrokersInvestment

Banks

AMCCredit Rating

Agencies

CONTRACTUAL INSTITUTION

DEPOSITORY INSTITUTION

INVESTMENT INSTITUTION

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Financial - Roles

Front Office Back OfficeMid Office

RM

Sales

Trading

Advisory

M&A

Equity Research

Risk

Treasury

IT

Finance

Admin

HR

Operations

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Flight back to theoretical world

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Basics

Topics

Financial Statement Analysis

Interest Rate

Risk and Return

Time Value of Money

Who needs it?

Everybody including non-finance major students

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Corporate Finance

Topics

Cost of Capital

NPV, IRR, Payback etc

Capital Budgeting

Capital Structure

Dividends

Leasing

Mergers and Acquisitions

Who needs it?

Non-Financial sector (strategy, business analyst)

Investment Institutions

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Investment Analysis

Topics

Financial Instruments

Portfolio Theory and CAPM

Term Structure of Interest Rates

Duration and Convexity - Fixed Income

Bond and Stock Valuation

Who needs it?

Investment Institutions

Fund managers for banks, NBFIs and Insurance

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Risk Management

Topics

Uncertainty and Risk

Mathematics of risk

Hedging, Derivatives and Insurance

Credit Risk Management

Who needs it?

Credit Risk Analysts (Banks and NBFIs)

Treasury (Banks, NBFIs and non-financial sectors)

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Bank Management

Topics

Bank Capital Structure and Regulation

Analyzing bank performance

Recent trends in Banking

Bank failures

Who needs it?

Bankers

Credit and Equity Analysts

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