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  1. 1. CS1414 FINANCIAL DOMAIN Unit 1: (2 Hrs) - Overview of the course • Get an overview of the financial domains and understand the basic concepts. • Understand the functioning of various types of financial institutions – investment banks, brokerage houses, commercial banks, Insurance companies and employee benefit companies. • Understand the services they offer and the functions they perform • Who are the end users of those services? • SunGard solutions related with the services and the functions • Understand the relationship among the different types of financial institutions. Unit 2: (5 Hrs) – Introduction to Financial Markets Capital Markets: (1 Hr) • Financial Markets Introduction - o Capital Market o Commodity Market o Money Market o Derivative Market o Currency Market o Insurance Market • Company and it's Capital needs (New business, expansion, modernization) , Ways to raise capital and Need for capital market • Role of capital markets o Capital Market Participants - Government, Banks, Corporations o Role – Raise long term funds, Provide a platform for trading o Division of Capital Market - Equity, Debt Market • Entities – exchanges, brokers, ECNs o Exchange, it's functions – price discovery, liquidity, risk transfer o Brokers, Client interaction, Need for broker-client system o ECN definition, diff between Exchange and ECN, advantage/disadvantage over exchange, changing scenarios & success of European MTFs • Different types of financial instruments and their markets o Need for different instrument types o Various Instrument Types : Equity, Debt, MM,FX, Derivatives (Futures & Options)
  2. 2. o Non-standard instruments : OTC instruments • Primary vs. secondary markets o Primary and Secondary Market comparison o Participants and their functions Derivative Market: (2 Hrs) • Derivatives o Derivatives & their need o Forwards contracts, Futures & Options o Difference between Futures & Forward contract • Types of Derivatives (Brief Introduction) o Stock Derivatives o Index Derivatives o Debt Derivatives o Commodity Derivatives o Currency Derivatives o Weather Derivatives o Interest rate Derivatives • Participant of Derivative Market o Hedger o Speculator o Arbitrager • Futures & Options o Futures & Options comaprison o Option Types : Call/Put, American/European o Payoff for Futures o Payoff for Options o Application of Futures and Options Commodities Markets: (2 Hrs) • Overview: o Define Commodity / Commodity market. o Various products traded in commodity market. o History / Evolution of commodity market: o Major commodity exchanges in globe. Some statistics related to volume traded / size of market.
  3. 3. Regulation of commodity markets. o Major commodity exchanges in India. Products traded in Indian market Size of Indian Market • Commodity Derivatives: Participants, Contract specifications and Pricing: o Different types of participants of commodity market:  Hedging: Practical examples.  Volatility of markets: Importance of hedging.  Role of commodity markets: Price discovery  Speculation: Portfolio Management, Diversification of asset classes.  Arbitrage o Common Commodity Derivatives traded & Contract specifications:  Futures/Forwards  Options/Asian Option/Spread Option  Swaps  Basis Swaps  Others o Pricing of commodities:  Granularity of Forward Curve  Contango  Backwardation  Seasonality factor of commodities.  Determination of Futures Price.  The Cost-of-Carry model
  4. 4.  Hybrid model (i.e. Cost-of-Carry & future supply and demand) • Commodity Contract Specifications and Life Cycle: o Life cycle of commodity contract: Front office Middle Office Back Office o Listed contract Vs OTC contracts  Clearing house  Role of clearing house  Clearing of OTC trades  Margining: Margin calculation  Initial Margin  Maintenance Margin o Valuation of trades: Mark to Market: Settlement: Counter-party reports Greek reports o Exercise & Settlement: Cash settlement Vs Physical settlement. Physical contracts.
  5. 5. Ware house receipts. • Conclusion: o What happens next in Commodity markets? o Latest development: o Evolution, trends & Observations: o Recent Economy Melt down & Fed policies. Unit 3: (8 Hrs) – Investment Banks and services offered Investment Banks: (1 Hr) • What is investment bank? • Evolution of investment banks o 19th century trading world, Need for Investment Bankers, Merchant Banking o History of Investment Banking/Morgan House o Current Investment bank structure – Front Office, Middle Office, Back Office • Brief overview of services offered in Front Office o Investment Banking – Underwriting, M&A advice, corporate finance, private equity o Investment Management - Institutional Asset & Private Wealth management o Derivative Structuring o Research • Brief overview of services offered in Middle Office o Risk Management : Analysis of Credit and Market Risk o Finance : Capital Management o Compliance: Government regulation • Brief overview of services offered in Back Office o Operations – Analysis of trade data • Regulatory framework for Investment Banks o Need for Regulatory Framework – Market crisis, Financial Crime
  6. 6. o Regulatory Entities Goals – market confidence, public awareness, investor protection, reduction in financial crimes. o Regulatory Entities and their functions. o Geographical difference in regulation. Services offered by an Investment Bank: Investment Banking: (2 Hrs) • Raising capital in the primary markets o Methods of issuing securities – IPO, Rights Issue, Preferential Issue o Investment banks role – Underwriter, Need for Underwriting and Underwriting Process flow • Advise on M&A o Merger & Acquisition, comparison, types o M&A activities – Business valuation, Financing M&A, taxation, Negotiating with merger target o Need for investment bank for M&A • Corporate Finance o Actual Corporate Finance & Activities - Investing Decision, Financing Decision, Dividend decision o Investment Banking - Corporate Finance Goals – max corporate value, manage corporate risk o Role of Investment banker – Evaluate companies financial needs, Raise appropriate capital for those needs (equity-debt ratio, DCF, NPV) • Private equity o Concept private equity, o Types of Private Equity & Investment banks: LBO, Venture Capital, Growth Capital, Distressed investments. Investment management: • Institutional Asset Management (3 Hrs)  Overview of Mutual Fund.  MF Structure & Regulation  How Fund Start Up?  How People put Money In?  The Advisor manages the portfolio.  How MF makes money?  How NAV is calculated?  People take money out.  Risk in types of Fund.  Introduction to Hedge fund/Unit Trust.
  7. 7. Private Wealth Management: (2 Hrs) o Overview o Entities involved in private wealth management o Institution serving private clients o Service Delivery Platforms  Discretionary portfolio management  Non Discretionary Portfolio Management  Advisory Portfolio Management o The wealth life cycle  Accumulation  Preservation  Transfer o Components of private wealth management  Client Analysis  Analyzing clients Investment objectives and time horizons  Financial planning and goal setting  Investment Recommendation and Plan Execution  Performance monitoring and portfolio rebalancing  Risk Management  Performance Reporting  Research Unit 4: (5 Hrs) – Services offered by a Brokerage House: Sales & Trading: (2 Hrs) • Trading life cycle • Retail/Institutional trading • Principal trading – position building/P&L • Orders – Different types of orders • Order processing, Order book and order execution • Quotes processing • Important terminologies and concepts - Clearing and settlement: (2 Hrs) • Trade flow (equity) refresher • Clearing and settlement purpose • BIS (Bank for International Settlement) settlement models • Basic clearance and settlement services • Functional model • Introduce various entities involved in clearing and settlement
  8. 8. • Describe a typical clearing and settlement cycle • Explain functions performed by various entities involved in a clearance and settlement cycle Unit 5: (4 Hrs): Retail Banking •basic purpose of commercial banks(what do they serve) •basic functions in a commercial bank •Concept of asset & liabilities o Assets:  Loan accounts o Liabilities:  Operative accounts  Time Accounts •Inter bank settlements o Clearing & collection 0 •Payment Systems o Intra & Inter bank - DD, PO, Cheques, TCs, Electronic payments (ACH, ECS…) •Fee based functions o TF, Payment services, exchange operations... •How banks make money. Unit 6: (3 Hrs): Insurance • Global Market Overview of Insurance Segment • Risk Management & Insurance o Types of Risk o Insurable Risk o Risk Management • Principles of Insurance o Utmost Good Faith o Indemnity  Subrogation  Contribution o Insurable Interest o Proximate Cause • Insurance Value Chain o Sales and Marketing  Agents and Brokers  Responsibilities of Agents to Insurers  Responsibilities of Agents to Insureds  Authority of Agents
  9. 9.  Other Marketing Channels o Underwriting  Underwriting Activities  Underwriting Management  Underwriting Process o Claims  Claim Handling Responsibility  Claim Handling Process  Loss Reserves o Insurance financials  Insurer Profitability  Insurer Solvency  Monitoring Insurer Financial Performance o Reinsurance  Proportional Reinsurance  Non Proportional Reinsurance  Treaty Reinsurance  Facultative Reinsurance • Introduction to Life & Health Insurance o Life Insurance  Life Insurance  Annuities o Health Insurance  Medical Insurance  Disability Insurance • Introduction to Property & Casualty Insurance o Property Insurance  Property Loss Exposures  Property Insurance Policy Provisions o Casualty/Liability Insurance  Legal Liability  Exlements of Liability Loss Exposures  Categories of Liability Loss Exposures  Liability Insurance Policy Provisions • Information Technology in Insurance Industry o Product Development o Product Distribution o New Business & Policy Administration o Claims Processing Unit 7: (2 Hrs): Benefit Administration • Overview of Retirement Planning • Plans and Participation • Contributions • Vesting • Investments
  10. 10. • Loans and Withdrawals • Distribution • Compliance Overview Unit 8: (3 Hrs): Corporate Treasury • Treasury Objectives • Overview • Parties • Payables and Receivables • Cash Management • Treasury Accounting • Treasury Dealing • Risk Management • Back Office Operations • Overview of Financial Statements • Glossary Terms • Income Statement • The Balance Sheet • Cash Flow Statements Unit 9: (6 Hrs): Risk Management and Compliance Risk Management: (3 Hrs) • Basics of Risk Management o What is risk? o Risk management objectives • Risk Management – Financial Institutions o Different types of risks:  Credit Risk  Market Risk  Operations Risk  Asset Liability Management Risk o What is VaR. Approaches to compute VaR. o Risk Mitigation Techniques Compliance: (3 Hrs) • Compliance Objectives • Compliance examples o BaselI & II compliance * SOX compliance o NBFC compliance o Trading FO/BO compliance o MIFid/RegNMS compliance • AML – Financial Fraud detection and Alert System.