Global Securities & Investment Management Target Audience: This course is focused at those who are seeking to acquire an overview of Finance, more specifically a foundation in capital markets, products, institutions. The course covers entire gamut of financial products, namely, equities, debt, money markets, foreign exchange, futures, options. It also covers important topics of mutual funds, risk return in a portfolio context role of Capital Asset Pricing Model (CAPM). The issues of market structures intricacies of order-driven markets are also covered in this course. The course does not pre suppose any knowledge of subject all that is expected is that student be comfortable with fundamental principles of Finance which are covered in first year Finance courses. Objectives: The course, as name suggests, gives students an overview of securities markets various products that are available in markets. It is a course that will cover almost all aspects of financial markets but will not go too much in to details of each of topics. This may work out to be an informative course for those who want to have a broad macro perspective about financial markets products. The course could consequently be very useful as a preparation for Final Placements. The broad objectives of this course are: 1. To describe intricacies of financial products such as stocks, bonds, foreign exchange, derivatives. 2. To underst operations of mutual funds, exchange traded funds, pension funds. 3. To underst concept of risk its manifestations measurement of risk in a portfolio context. 4. To apply knowledge of financial products markets to study real-life issues faced by traders financial institutions.
Learning Outcomes: At end of this course students should be able to: 1. Underst similarities differences between various securities products such as stocks, bonds, derivatives. 2. Underst mechanics working of financial markets for various products. 3. Underst operational aspects of mutual funds, pension funds. 4. Appreciate mechanics of order placement execution. 5. Appreciate uses, risks, limitations of such products in an actual business context. 6. To appreciate various forms of financial risk study mean-variance risk-return framework capital asset pricing model. Primary Text: Fundamentals of Financial Instruments ; Sunil Parameswaran, Wiley India Houts: Relevant houts wherever required will be hed out, students are expected to refer to material covered in houts during course Evaluation: The evaluation pattern will be as follows: Mid Term: The midterm shall have 40% weightage shall be an in class multiple choice questions based exam End Term: The end term shall have 40% weightage shall be an in class multiple choice questions based exam Group Based Homework: Group based homework shall contribute to 20% of course evaluation
Required session-wise detail for every course for EQUIS/AACSB accreditation. Each course is for a total of 40 hours. LESSON PLANS Class. Specific Learning Objectives for Lesson Concepts / Topics Covered Required Reading Suggeste d Reading: Assessme nt of Learning Instructional Strategies Day-1 Session s 1& 2 To underst structure function of a modern financial market; appreciate nature of instruments that trade in m institutions that operate in m Financial Institutions, Instruments Markets - Why financial markets? - Categories of economic units - Financial Claims Assets & Liabilities - The concept of a balance sheet - Types of securities o Debt o Equity o Preferred Shares o Derivatives o Foreign Exchange o Mortgages Chapter- 1 of Textbook PPT Mock Quiz Lectures & Movies - Concept of return or yield
- Concept of risk - Concept of liquidity - Classification of markets o Primary vs. secondary markets o Direct vs. indirect markets o Money vs. capital markets - Market Intermediaries o Brokers o Dealers o Investment Bankers - Concept of bid ask prices - Concept of underwriting of public issues - The Glass Steagall Gramm Leach Bliley Acts - Stock Exchanges - Listing of securities o Listing vs. registration - Bond markets - Derivative markets - The concept of long short
positions - Sell-side traders vs. Buy-side traders - The concept of a specialist - Clearing settlement - Depositories custodians - The principle of arbitrage - The Eurocurrency market - Floating rate loans - Eurobonds Foreign bonds - Globalization of equity markets Day-2 Session- 1 o Dual listing of shares - ADRs GDRs o The Concept of fungibility Hout & PPT Mock Quiz Lecture & Short Movie Clips To underst structure of an order driven securities market. To appreciate intricacies of - International Banking Facilities Types of Orders Market Structures - Introduction to orders - Why orders? - Order related terminology
various order types - Continuous markets with electronic rule based order matching o Price Time priority rules order matching o Market vs. Limit orders o Size as a priority rule o Stop-loss orders Stoplimit orders - Block trades - Time conditions - Spread Orders - Markets structures - Trading sessions o Call markets vs. Continuous markets - Trading hours - Execution systems o Quote driven o Order driven o Brokered o Hybrid
- Types of order driven systems o Oral auctions o Continuous electronic auctions o Crossing networks o Single price vs. multiple price auctions - Market Information Systems Day-2 Session- 2 o Collection o Distribution - Ticker symbols - The concept of transparency Chapter- 2 of Textbook PPT EXCEL Exercise - Order routing systems - Order presentation systems Time-Value of Money A revisit - Determination of interest rates - Interest rates inflation - The Fisher Equation - Interest rates exchange rates - Present values
- Future values - Annuities Day-3 Session s-1&2 - Perpetuities - Amortized Loans - The Truth in Lending Act concept of APR Chapter- 3 of Textbook PPTs Mock Quiz Lectures & Movies To underst equity securities; appreciate various corporate actions ir impact on equity shares; to underst constructio n behavior of stock market indices; to appreciate Equity Markets An Introduction - Nature of common stock - Voting rights - Preferred shares - Margin trading & Short selling o Federal regulations o Concept of owner s equity o Concept of maintenance margin o Short selling uptick rule
principles behind equity valuation study alternative models for same. - Stock indices - Types of indices o Price weighted o Value weighted o Equally weighted - Forming mimicking portfolios - Portfolio rebalancing Equity Valuation Models - Industry analysis - Company Analysis Day-4 Session s- 1& 2 - Dividend Discount Models o The constant growth model o The two-stage model o The three-stage model o The H-model - Issues in determining dividend growth Chapter- 4 of Textbook PPTs Mock Quiz Practice Problems Lectures EXCEL based demonstration s To underst bonds ir valuation; to appreciate bond rates - Free cash flow to equity
structures or than plain vanilla; to underst different yield measures used in market; to study concepts of yield curves term structure compare alternative ories of term structure; to underst significance of duration convexity concept of Immunizati Bond Markets - Plain Vanilla Debt o Valuation on a coupon date o Price versus yield o Par, discount premium bonds o Zero coupon bonds o Floating rate bonds o LIBOR o Callable puttable bonds o Convertible bonds - Valuation of bonds in between coupon dates o The procedure for Treasury bonds o The procedure for corporate bonds - The concept of accrued interest o Clean vs. dirty prices - Yields o Current Yield o YTM
on o Sources of Returns from a Bond o The Reinvestment Assumption o Reinvestment Risk o Realized Compound Yield o Holding Period Returns o Yield to Call o Portfolio Yield - Coupon Rolls - Pricing a Roll - Inflation Indexed bonds o P-linkers o C-linkers - Yield to Average Life - Yield to Equivalent Life Bond Markets Bond Portfolio Management Day-5 Session- 1 & 2 - Introduction to Yield Curves - Term Structure Analysis - Bootstrapping - Duration - Convexity - Dispersion Chapter- 5 of Textbook PPTs Mock Quiz Lectures; EXCEL Based demonstration s
- Immunization - Coupon stripping o C-Strips o P-strips To underst money market instruments ir use by corporation s The Money Market - T-bills o Re-openings o Discount Yields o Bond Equivalent Yields o Money Market Yields Day-6 Session s-1& 2 o Concept of Carry o Concept of a Tail - Repos o Margins o General collateral versus Specials - Sale Buy-back PPT Mock Quiz Lecture EXCEL Exercise - Negotiable CDs - Commercial Paper - Bills of Exchange - Bankers Acceptances
Eurocurrency Deposits Day-7 Session s-1& 2 To study definitions significance of various forms of market efficiency: to underst difference between idiosyncrati c risk market risk; To study CAPM its uses. Portfolio Theory CAPM - Market Efficiency - Fundamentals of Mean Variance Theory - The Mamatics of Portfolio Risk - The CML SML - The CAPM its uses Hout & PPT Mock Quizzes Lectures; EXCEL Based Demonstration s; Movies To underst mutual fund Mutual Funds Pension Funds - Definition of a mutual fund
Day-8 Session s-1& 2 industry; to learn about different types of funds; to learn about exchange traded funds; to underst concepts of defined contribution defined benefit pension plans - Why invest in such funds? - Advantages disadvantages of investing in such funds - Open-end vs. closed-end funds - The concept of NAV - Unit Trusts - Loads o Front-end loads o Back-end loads o Level loads o No-loads - Multiple share classes - Expense ratio o Management fees o 12b-1 fees o Or expenses - Categorization of funds Chapter- 6 of Textbook PPTs Mock Quiz Lectures; EXCEL based demonstration s o Money market funds o Debt funds o Equity funds o Hybrid funds - Taxation issues
- Exchange Traded Funds Futures Markets - Forward versus Futures contracts Day-9 Session s 1 & 2 To underst derivative markets product such as futures, options, swaps; to learn about valuation of futures forwards derivative securities; to appreciate uses of futures hedging speculation - Types of assets underlying futures contracts - Derivative exchanges - Types of assets underlying options contracts - Call Put options - European versus American options - Hedgers, Speculators Arbitrageurs - The role of futures options markets - Stardization of futures contracts - Margins marking to market - Liquidating a futures position - Role of clearinghouse Chapter- 7 of Textbook PPTs Mock Quiz Lectures & EXCEL based demonstration s - Trading volume versus Open
Interest - Valuation of Futures Contracts - Pure Versus Consumption Assets - Hedging Speculation using futures To underst put-call parity ad study pricing of options using Binomial as well as Black- Scholes model; to study structure uses of various options strategies Options Markets - Properties of American options - Put-Call Parity for European options - Intrinsic Value Time Value - Option Premia at Expiration - Upper Bounds for Call Options - Lower Bounds for Call Options - Upper Bounds for Put Options - Lower Bounds for Put Options - Early Exercise of American Options - Put-Call Parity Equivalent for American Options - Long calls - Long puts - Writing naked calls - Writing puts
- Writing covered calls Day-10 Session s 1& 2 - Bull Spreads - Bear Spreads - The Convexity Property - Butterfly Spreads - Straddles - Strangles - Straps Chapter- 8 of Textbook PPT Mock Quiz Lecture & Movie - Strips - Box Spreads - Risk Neutral Valuation - Binomial Tree based valuation for both European American options - Black Scholes option Pricing model for European Options o Properties of Black Scholes Option Pricing Model - Adjusting option prices for dividends To learn Fundamentals of Foreign Exchange
about foreign exchange markets used of foreign exchange derivatives by importers exporters - The spot market o Direct quotes o Indirect quotes o European versus American terms - Arbitrage o One-point arbitrage o Two-point arbitrage o Triangular arbitrage - The forward market - Merchant rates exchange margins - Covered Interest Arbitrage - Inter-bank swap deals - Option forwards - Covered Interest Arbitrage