F.S REVISION

Overview• Part 1: Overview Lectures 1,2,3

– Fin System, Banking, Non-bank

• Part 2: Share Lectures 4,5– Share market, participants, price analysis

• Part 3: Debt Lectures 6,7,8– Corporate debt, International debt, Interest rates

• Part 4: FX Lectures 9,10– FX market, FX risk management

• Part 5: Derivatives Lectures 11,12,13– Futures, FRA, Options, Swaps

Lecture 1- Financial System

• 4 elements of Financial system• 4 attributes of financial assets• 3 types of financial instruments• Classifications of financial markets• Financial assets, instruments and securities• Sectoral flows of funds• Functions of financial system• No calculation

Lecture 2- The banking sector

• Categories of banks• Functions of banks• Asset vs Liability management• Sources of funds (4 deposit sources + non-

deposit)• Uses of funds (lend to gov, biz, per.)• 4 types of OBS• CAR (8%, 50%) (Weights: 0, 20%, 50%, 100%)• Calculation: CAR (AQ1)

Lecture 3- Non-Bank FI

• Investment / Merchant banks• Life Insurance Offices• General Insurance Offices• Superannuation funds• Finance Companies• Permanent building societies• Credit Cooperatives• Managed Funds• No calculation

Lecture 4- Share market

• 7 roles of stock exchanges• IPO and advantages of listing• Equity funding alternatives• Investment risks• Taxation• Share pricing• Calculation: Shareholders income tax

(AQ2)

Lecture 5- Share price analysis

• Fundamental analysis: – bottom up (accounting ratios + other info)– top down (7 factors)

• Technical analysis– MA (and weighted MV)– Charting (Trend lines, S&R lines, Continuation

pattern, Reversal pattern)

• RW and EMH• Calculation: Moving average

Lecture 6- Corporate Debt

• Short-term: – trade credit, intercompany loans, bank overdraft,

commercial bills, p-note, NCD, inventory loans, AR finance, factoring

• Long- term: – Term loans– Mortgage– Debentures, Unsecured notes, Subordinated debt– Leasing

• Calculation: pricing discount securities and fixed- rate securities

Lecture 7- International Debt

• Eurocurrency:– Short-term bank advances– Stand-by facilities– Long- term loans

• Euronote– NIF, ECP, MTN

• Eurobond (# domestic, foreign)– Straight, Floating, Convertible

• Calculation: same as in lecture 6

Lecture 8- Interest Rate

• Monetary policy: Factors affecting

• LF approach

• Term structure of interest rates– 3 theories: Expectation, Segmented market,

Liquidity preference

• Risk structure of interest rates

• Calculation: expectation theory

Lecture 9- FX market

• Participants

• Tom, Tod, Spot, Forward transactions

• Spot, Forward Quotations

• How to determine forward e/r

• 5 factors affecting e/r

• Calculation: cross rates, forward rates, forward outright rates

Lecture 10- FX risk• 4 risk exposures

• Market- based hedging techniques

• Internal hedging techniques

• Calculation: BSI

Lecture 11- Futures and FRA• See revision table• Calculation: FRA settlements, Futures on

bank bills

Lecture 12- Options

• See revision table

• Calculation: draw P/L profiles and comments

Lecture 13- Swaps

• See revision table

• Calculation: construct swaps

FINAL EXAM

• 2 hours + 5 minutes (reading)

• Limit: from lecture 4-lecture 13

• Format: – MCQs: 20 marks - 30 marks– SHORT ANSWER: 6 questions - 30 marks– ESSAY & PROBLEM: 3 questions – 40 marks

Gluck & wish all of U pass with flying colors