2.finance and banking

INSTITUTE OF MANAGEMENT TECHNOLOGY

GHAZIABAD

Track: Finance & Banking

Course Outlines

(2014-2015)

# Course Term

1 Commercial Banking V

2 Derivatives Management: Futures, Options, Risk V

3 Financial Valuation of Technology V

4 Fixed Income Securities V

5 Project Appraisal and Financing V

6 Security Analysis and Portfolio Management V

7 Treasury Analytics V

8 Financial Econometrics VI

9 Financial Services VI

10 Financial Statement Analysis and Business Valuation VI

11 Infrastructure and Real Estate Finance VI

12 International Financial Management VI

13 Mergers Acquisitions and Corporate Restructuring VI

14 Working Capital Management VI

Commercial Banking

Background and Objective

Functioning of economy and markets heavily relies on banking and financial institutions (FIs). Banks and FIs play a crucial and integral role in running the economy with subject to the strict regulations. Banks are at the heart of any economy’s financial system. They play crucial roles in channelizing funds to the borrowers, and protecting and managing our savings. However, in today’s world banking industry and its commercial activities cannot be compartmented from other ‘non-banking financial institutions’. The growing linkage between finance, and IT and IT enabled services has fostered the development of financial products and their transaction. The integration of economies across the world in the globalization era raises the importance to study commercial banking.

The course is intended to deliver the following objectives;

• Understanding the origin of banking system and the basic tenets of commercial banking • Recognizing the issues of regulatory compliances (Programme objective‐2.2) • To know the mechanism and implementation of asset liability management • To understand the assessment and management of risk, portfolio investment and liquidity positions. • To demonstrate the social responsibilities in business context (Programme objective‐2.1).

Teaching Pedagogy

The course employs chapters of the books, various articles as the means to link the theory with practices. Every theoretical session will be followed by problem solving exercises to appreciate the concepts. Data sets for the hands-on exercises are to be provided from the folder Commercial Banking within the ‘Hands-Out’ available in the common server.

Assessment method in alignment with learning outcomes

Students will be evaluated on the basis of quizzes, end term, individual case submission, final project presentation and submission, and class participation. The weightage given to each of these units is listed below:

Evaluation Criteria

• Quizzes (3) 30% • End Term 30% • Individual Case Analysis submission 10% • Final project Presentation and Submission 20% • Class participation 10%

Case Evaluation

Cases to be submitted should be analysed based on the following point;

• The major decision problem/questions • Approach towards the problem • Analysis and discussion • Recommendation

Assignment Evaluation

Final assignment is to be done and presented in a group of 5-6 members. The group should be formed after the second session. Each group has to select a bank. Each group is expected to present all the concepts and analysis discussed in the class. Assignment presentation would be evaluated based on the concepts and coverage, depth of analysis, presentation skill and question & answer.

Class Participation

As this course is centred around both theory and problem solving, so active classroom participation is expected from every student. Those who will present would definitely be categorised as active class participants.

Evaluation Type Weightage Porgramme Learning Objective (Student’ Learning

Outcome)

Case Analysis & Project Submission

Objective-2.1 Objective-2.2

Case analysis submission on regulatory compliances

10% - √

Project submission comprising how social responsibilities are delivered

20% √ -

Case Submission Guidelines

i. Each individual has to submit the case in hard copy. ii. The case is to be analysed either based on the questions asked and/or decision problem to be

identified by the participants. iii. The application of concepts discussed in the class is expected to be reflected on the case analysis. iv. Help/support from external resources can be sought provided you duly acknowledge them by writing

the source. v. Each submission should carry the name, roll number and the case title. vi. The font should Times New Roam and font size should be 12 and should be properly (Justify) aligned. vii. All the tables, pictures and graphs should be presented in the last section, i.e. Appendix.

Guidelines for Assignment/Project Presentation

i. The presentation should be based a proper flow. ii. The rationale for choosing the bank should be justified. iii. The data collected should be properly analysed and presented. iv. Each presentation has to finish off by 25 minutes. First 10 minutes for the background information,

portfolio activity etc. 10 minutes for analyses, final 2 minutes for conclusion and 3 minutes for question & answer.

Session Plan Session 1: Origin of banking, Theory of Banking, Why do Banks exist? & Economics of banking

Reading: Chapter-1 from the text book,

Article- Economics of retail banking and Notes on Banking Industry

Video show of first chapter of The Ascent of Money.

Session 2: The Organization and Structure of banks, and Role of regulation and central bank

Reading: Second and Third chapter from the book.

Article-Central Banking in India, Manipulating BASEL-III, Impact of Deregulated Savings Bank Interest Rate and Too Big To Fail Problem and Anatomy of Bank Failure

Case, Basel-III: An Evaluation of New Banking Regulation, will be given for analysis and submission (Programme objective-2.2).

Session 3: Financial Statement and Financial Performance of Banks and Problem Solving

Readings: Ch-5 & 6 from the book

Session 4 &5: Asset Liability Management and Problem Solving

Readings: Ch-7 from the book Session 6 &7: Risk Management in Banks- Financial Futures, Options, Swaps, and Other Hedging Tools and Problem Solving Readings: Ch-8 from the book Article: Commercial Bank Risk Management: An Analysis of the Process Session 8 & 9: Risk Management in Banks-Asset-Backed Securities, Loan Sales, Credit Standbys, and Credit Derivatives and Problem Solving Readings: Ch-9 from the book Session 10 & 11: Investment Functions and Portfolios in Banks and Problem Solving Readings: Ch-10 from the book Session 12: Managing Liquidity in Banks and Problem Solving Readings: Ch-11 from the book Session 13: Managing and Pricing Deposit Readings: Ch-12 from the book

Session 14: Capital Management for Banks and Problem Solving Readings: Ch-15 from the book Article- Dilemma of Indian Banking,

Session 15 & 16: Course Recap, Discussion of Current Issues and Assignment Presentation (Demonstrating the social responsibilities in business context -Programme objective-2.1).

Reading: Loose monetary policy and excessive credit and liquidity risk-taking by banks and Destabilising market forces and the structure of banks going forward

Required Text Book

Bank Management and Financial Services by Peter Rose and Sylvia Hudgins

Reference Book

Modern Commercial Banking by H.R. Machiraju

Derivatives Management


Derivative products have emerged globally, in a large way, as significant tools for price discovery and risk management. In India the last few years have witnessed significant developments towards the introduction of various derivative products, placement of the appropriate regulatory frameworks and in the setting up of modern, transparent, and technology driven institutional mechanisms to operationalise these products. Derivatives are contracts derive its value from other underlying assets. Derivatives are used as hedging or risk mitigating instrument to minimise the exposure against the adverse movement of price, exchange rates and interest rates. In India, as in the developed world, there exist both Over-the-Counter (OTC) financial derivatives as well as exchange traded ones. The global integration has also rendered the risk borderless. The complex nature of risk of today’s world has intensified the importance of derivatives. At the same time the role of derivatives as risk management tool has also been attacked by many researchers and practitioners in the wake of recent global financial crisis.

The course is intended to deliver the following objectives;

• To familiar with the different concepts of derivatives and derivatives management • To know the mechanism of hedging • Recognizing the issues of regulatory compliances (Programme objective‐2.2) • An understanding of global scenario after taking into the local context (Programme objective‐4.1).

Teaching Pedagogy

The course employs chapters of the books, various articles as the means to link the theory with practices. Every theoretical session will be followed by problem solving exercises to appreciate the concepts.


Students will be evaluated on the basis of assignments, end term, final project presentation and submission, and class participation. The weightage given to each of these units is listed below:

Evaluation Criteria

• Individual Assignments 20 % • End Term 50 % • Final project Presentation and Submission 20% • Class participation 10%

Group Assignment Evaluation

Final assignment is to be done and presented in a group of 5-6 members. The group should be formed after the second session. Each group has to select a derivative product and the country for analysis. Each group is expected to present all the concepts, analysis discussed in the class and compare the derivative product in India and the country chosen. Assignment presentation would be evaluated based on the concepts and coverage, depth of analysis, presentation skill and question & answer

.

Class Participation

As this course is centred around both theory and problem solving, so active classroom participation is expected from every student. Those who will present would definitely be categorised as active class participants.

Evaluation Type Weightage Porgramme Learning Objective (Student’ Learning Outcome)

Case Analysis & Project Submission

Objective-2.2 Objective-4.1

Individual assignment submission on regulatory compliances

10% √ -

Project submission global derivatives markets scenario with a consideration of Indian context

20% - √

Individual Case Submission Guidelines

• Each individual has to submit the case in hard copy. • The case is to be analysed either based on the questions asked and/or decision problem to be identified

by the participants. • The application of concepts discussed in the class is expected to be reflected on the case analysis. • Help/support from external resources can be sought provided you duly acknowledge them by writing the

source. • Each submission should carry the name, roll number and the case title. • The font should Times New Roam and font size should be 12 and should be properly (Justify) aligned. • All the tables, pictures and graphs should be presented in the last section, i.e. Appendix.

Guidelines for Assignment/Project Presentation

• The presentation should be based a proper flow. • The rationale for choosing the derivative product and the context should be justified. • The data collected should be properly analysed and presented. • Each presentation has to finish off by 25 minutes. First 10 minutes for the background information,


Session Plan

Session 1: Introduction of Derivatives.

Reading: Chapter-1 from the text book,

Article- Basics of Financial Derivatives and Introduction to Derivatives

Session 2 and 3: Type of Derivatives 1- Forwards and Futures and Options

Reading: Chapter 1 and Chapter 2 from the book.

Session 4 and 5: OTC Derivatives, SWAPS: Interest Rate Swap, Currency Swap,

Readings: Ch-7 from the book

Session 6 : Correlation Swap, Credit Default Swap, Total Return Swap, Variance Swap.

Reading: Study Material and Chapter 24 of the book

Session 7: Determination of forward and futures prices and Problem Solving Readings: Ch-5 from the book Session 8: Option Strategies Readings: Ch-11 from the book Session 9: Option Strategies and Option Greeks Readings: Ch-11 from the book Session 10: Option Pricing by Black Scholes Model Readings: Ch-14 from the book Case: Note on Crude Oil and Crude Oil Derivatives Markets

Session 11 and 12: Binomial Trees Readings: Ch-12 from the book Session 13: Exotic Options Readings: Ch-25 from the book Session 14: Energy and Commodity Derivatives Readings: Ch-33 from the book

Session 15 & 16: Presentations

Required Text Book

Options, Futures and Other Derivatives by John C. Hull

Reference Book

Derivatives and Risk Management by J. Varma (Reference)

Fixed Income Securities

Course Objective

This course focuses on fixed-income securities. Fixed-income securities include any claim whose value or risk is related to interest rates and interest rate uncertainty. While it is relatively easy to formulate the income claims of fixed-income securities, valuing and hedging these securities are more challenging tasks. This course explores key issues in fixed-income valuation, fixed-income portfolio management, and fixed-income risk management. Students will learn tools for valuing and modeling the risk exposures of fixed-income securities, with the ultimate goal of applying these skills in a career in financial services, consulting, portfolio management, and fixed income sales and trading. At the end of this course, you should be able to value different types of bonds and understand the different types of risks associated with these bonds. Course Format

The lectures will focus on the major points introduced in the textbook. We will draw on related academic research and books and articles by successful practitioners to illustrate some of the concepts being discussed. The lectures will not provide an exhaustive coverage of all topics in the text book. Prior to each class, students are expected to read the relevant textbook chapter and any additional assigned readings. You are encouraged to ask questions and to be an active participant in class. You are expected to attend class regularly, complete the class assignments and to come to class on time.

Learning Outcomes

The goal of this course is to present the conceptual framework used for the pricing and hedging of fixed income securities in an intuitive and mathematically simple manner. On successful completion of the course, students should be able to: i. Understand fundamental aspects of fixed income securities valuation. ii. Understand the forces that drive bond markets. iii. Analyze bond price dynamics. iv. Critically analyze the valuation of fixed income securities in terms of the: the direction of

future interest rate changes, the volatility of interest rates and the credit quality of the issuer. v. Interest rates and risk management in bond markets. vi. Develops insights into different bond portfolio strategies. vii. The exposure of a bond portfolio to market factors. viii. Effectively employ portfolio strategies that may control interest-rate risk and/or enhance

returns. Pre-requisites

The students enrolled in this course are assumed that they are acquainted with the concepts of Financial Institutions and Market course and have successfully completed the same. The readings from the text will be supplemented by other materials such as relevant news articles, academic journal articles and readings from supplementary books mentioned in the course outline. I recommend regular reading of a financial publication like The Economics Time, Business Standard, Wall Street Journal to stay abreast of current developments in the financial markets.

Grading:

1. Quiz (Best of 2) 20% 2. Project/Assignment and Presentation 20% 3. Case Analysis 10% 4. End Term 50%

Alignment of evaluation process with Learning Outcomes: The course will aim at achieving the above learning outcomes in alignment with the objectives of the PGDM program at IMT, especially the following objectives:

Specific Assessment Method

Weight

Intended learning objectives to be assessed

i ii iii iv v vi vii viii Case analysis 10% √ √ Quizzes/Mid Term 20% √ √ √ √ End Term Examination 50% √ √ √ √ √ √ √ √ Group Project and Presentation

20% √ √ √

Projects & Presentation: The projects are intended to give some hands-on familiarity with investments data and to provide some experience and insight into applying quantitative techniques useful in fixed income investment management. The project consists of 2 to 3 take home assignments. The name of the projects will be announced in the class after covering the subsequent topic. All the projects are group project. Group can be made with 4 to 6 students. If you choose to complete them in a group, please submit one copy for the entire group, noting the names of all group members. You do need to stick to the same group throughout the trimester. Each group has to submit the excel sheet (soft copy) and a word document (hard copy) before the deadline given. Delayed submission will not be entertained. Mention clearly the sources of all data and information. Also note that cut-paste from available reports will be penalized heavily. It might even lead to rejection of the report. Any kind of academic dishonesty will not be tolerated.

Text Book:

The study materials will consist of select papers/hand-outs. In addition, the students may refer to the following text books:

1. Frank J. Fabozzi, Bond Markets, Analysis and Strategies, Pearson Prentice Hall (7th Edition).

Supplementary Readings 1. Reilly and Brown, Investment Analysis & Portfolio Management, Cengage Learning (10th Edition),

Chapter‐17th and 19th. 2. Pietro Veronesi, Fixed Income Securities: Valuation, Risk and Risk Management, Wiley India Edition. 3. Bruce Tuckman, Fixed Income Securities, Tools for The Today’s Markets, John Wiley & Sons. 4. Frank J. Fabozzi and Steven V. Mann, The Handbook of Fixed Income Securities, Tata McGraw – Hill

(7th Edition). 5. R. Stafford Johnson, Bond Evaluation, Selection and Management, John Wiley & Sons (2nd edition).

Journals • Journal of Portfolio Management • Journal of Financial Economics • Journal of Financial Markets • Journal of Banking and Finance • Journal of Emerging Market Finance

In addition to above mentioned journals, please keep track of other journals, websites, published articles and papers on Bond Portfolio Management and Fixed income Securities. If you encounter an interesting article that you would like to share and discuss in the class, you can send me an email and I will share it with the class for a discussion.

Websites

Useful websites to be visited for the course to gain additional insights on the subject.

www.bseindia.com (Debt Market Segment) www.nseindia.com (Debt Market Segment) www.fimmda.org www.investinginbonds.com www.world-exchanges.org (World Federation of Exchanges) knowledge@wharton www.gmo.com www.ft.com www.bis.org/ (Debt Securities Statistics) www.icmagroup.org (The International Capital Market Association) www.asianbondsonline.adb.org www.ici.org www.myiris.co.in

Detailed List of Topics

The following is a detailed list of some of the major topics that are proposed to be covered in this course. Based on the progress of the class, changes (additions or deletions) may be made to this list. The suitable case studies that are expected to be discussed in the class will be announced during the course.

Session Wise Course Contents:

Session 1-2: Introduction to Fixed Income Securities

Learning Outcome

• Introduction to fixed income securities • Bond markets: their functions and determinants • Characteristics of bond • Risk, return and value of bond: conceptual framework

Readings/Handouts: Text Book (Chapters 1 and 2)

Session 3-4: The Analysis and Valuation of Bond

Learning Outcome

• Bond Pricing • Computing Bond Yields • Term Structure Theories of Interest Rates Readings/Handouts: Text Book (Chapters 3, 4 and 5)

Session 5-6: Bond Risks: Measurement and Management

Learning Outcome:

• Interest rate risk, credit risk, price risk, reinvestment risk • Duration, Modified Duration, Convexity • Bond Portfolio Duration

Readings/Handouts: Text Book (Chapters 4, 21 & Handouts)

Session 7-8: Bond Portfolio Management Strategies Learning outcome: • Passive and Active Management Strategies • Bond Lettering • Portfolio Immunization Procedure

Readings/Handouts: Text Book (Chapter 23, 24, 25, 26)

Session 9-10: Corporate Bond Rating and Bond Pricing Modelling Learning outcome: • Bond rating • Corporate Credit Analysis • Bond pricing and Bond yield Modelling

Session 11-12: Evaluation of Bonds with Embedded Options

Learning outcome:

• Binomial interest rate trees • Estimation of binomial trees

Handouts: R. Stafford Johnson, Bond Evaluation, Selection and Management (Chapter 14, 15)

Session 13-14 Introduction to Fixed Income Derivatives

Learning outcome:

• Interest rate derivatives • Credit derivatives

Readings/Handouts

Session 15-16: Project Presentation

Project Appraisal and Financing

Course Objectives:

This course is expected to enable students to understand mechanism of project appraisal in various stages, explore new and innovative sources of financing projects in the present day world. It would expose students to a wide range of financing techniques for core sector projects which are important constituents of our economy. The concepts developed in the finance core courses of the previous terms, particularly corporate finance, will be heavily utilized. The course would focus on how corporations and lenders evaluate investment proposals, raise cost effective funding from market and manage project risks.

Learning Outcomes:

At the end of the course, students should be able to:

1. To enable students to understand mechanism of project appraisal in various stages. 2. To appreciate the use of techniques applied in project appraisal. 3. To explore innovative sources of financing projects in the present day world. 4. To understand different risk estimation methods and their repercussions on projects. 5. Infrastructure finance requirements and filling up of the gaps

Alignment of Learning Outcomes:

The course will aim at achieving the above learning outcomes in alignment with the goals of the PGDM program at IMT, especially the following:

a. Demonstrate technical and analytical capabilities in Indian and global context. [Goal 1.1] b. Demonstrate effective communication skills. [Goal 1.2] c. Critically analyze situations to suggest innovative future growth opportunities [Goal 3.1] d. Demonstrate techno‐savvy capabilities to manage integrated environments. [Goal 3.2]

Course Format

The lectures will focus on the major points introduced in the textbook, and will draw on related academic research and books and articles by successful practitioners to illustrate concepts. Prior to each class, students are expected to read the relevant textbook chapter and any additional assigned readings. You are encouraged to ask questions and to be an active participant in class. You are expected to attend class regularly and come to class on time.

Evaluation

Assessment Method Weight

Quizzes : 20%

End Term Examination : 50%

Group Project/assignments/ : 20%

Class participation/case analysis : 10%



Weight

Intended learning objectives to be assessed a b c d

Quizzes/Mid Term

20% √ √

End Term Examination

50% √ √

Group Project and presentation

20% √ √ √

Class presentation/Case analysis

10% √ √ √

Guidelines on case analysis:

A number of cases will be used in this course. Cases are a great educational experience but to derive maximum learning value from them, you must be fully prepared with your analysis and come to the class ready to discuss the issues taken up in the case.

For each case, you should:

a. Identify the major problem, b. Give your recommendation to resolve this problem (both short and long term), and when appropriate c. Provide supporting analysis (both qualitative and quantitative) for your recommendations. d. Answer other questions provided for each case.

The class will be divided into a number of groups. For assigned cases, each group will submit the case analysis report and power point presentation one day before scheduled class.

Guidelines on Quizes and Exams:

The examination format might be a combination of work out problems, case-analysis, MCQs and essay-type questions. These questions will be designed to test your skills to critically analyze issues under consideration and your ability to solve problems using conceptual knowledge and innovative ideas. Due weight will be given to quality of organization and presentation of answers in exams. The examination will be on topics covered prior to the examination date. The end-term exam will not have MCQs. All tests and exams will be closed-book. You may use a simple non-programmable calculator. Notebook computers, electronic dictionaries, cell phones and other personal communications devices are prohibited. Borrowing/lending of any item in the exam is strictly prohibited.

Guidelines on Group Projects Students may form their own groups of not more than 4 members each group. Names with enrolment numbers of all your group‐members and 1‐2 contact‐emails for each group must be given to course instructor within two weeks of the start of the term. Student groups are encouraged to select their own project topic with approval of the course instructor. Groups should finalize their project title by the Third week of the term.

By the midterm each group needs to submit a brief description (3‐4 pages) of their project which may include: introduction/background of the study, the objective(s) of the study, the scope and methodology, likely conclusions and recommendation, and selected references.

As a part of the project, your group would tap primary/secondary sources of information and analyze the company/industry’s performance in relevant areas, study trends, investigate issues and problems facing the company, measures taken by the company/industry or the regulating authorities and also try to suggest how the company/industry could improve its future systems and performance.

Project presentations: Each group will be required to present their project work which should cover both the analysis of primary and secondary data, as applicable. Each presentation will be of 15 minutes with 10 minutes given to the group to highlight the key findings and 5 minutes for questions/discussion in the class.

The final project report: Final project report, incorporating the changes suggested during the project presentation, must be submitted latest by one week prior to the end‐term exam date, and should not exceed 30 pages. It should include the following:

• The Executive Summary • Introduction/Background of the study • The Conceptual Framework. • Existing System and/or the Objective(s) of the Study • Scope and Methodology. • Data Collection and Analysis • Conclusions and Recommendation. • Limitations and Scope for Further Research • References.

The above format may be modified as necessary.

Caution: Please note that plagiarism or cut‐paste from available reports will be penalized heavily. It might even lead to rejection of the report. Grading of the report will be done on the strength of the analysis and explanation therein, as well as quality of primary & secondary sources tapped. All group members must contribute to the project work; piggyback riders might be penalized.

Teaching Pedagogy

The pedagogy will be a mix of lectures, case discussion, assignments and field/library based research projects.

Course Pre‐requisites

Prerequisite to this course is the learning derived from the core courses in accounting and finance, particularly corporate finance. Students are expected to have a working knowledge of a spreadsheet language, preferably Excel, as well as some fluency in quantitative techniques.

Guidelines on student’s workload: This course requires an estimated 60 hours of student effort, including the time for class participation, reading of the text and other suggested materials, work-out problems and cases, preparing for quizzes and exams, assignments and projects.

Books and References (Latest Edition):

Text Book:

Projects: Planning, Analysis, Selection, Financing, Implementation and Review by Prasanna Chandra, Tata McGraw Hill, 8/e (Referred as PC in this document)

Other Readings:

1. Project Financing, Finnerty, John Wiely and Sons (Refereed as Finny) 2. Capital Budgeting and Investment Appraisal by Shapiro, Pearson Education 3. Project Management and Appriasal, Sitangshu Khatua, Oxford Higher Education 4. Project Reports and Appraisals, H.P.S. Pawha, Bharat 5. Project Management, Dennis Lock, Gower 6. International Project Analysis and Financing, Gerald Pollio, Macmillan Business 7. Modern Project Finance, Benjamin, John Wiely and Sons Note: Additional readings and cases may be announced during the course.

On line resources

http://www.projectsmonitor.com

http://planningcommission.nic.in

http://www.rbi.org.in

http://www.moneycontrol.com

http://www.mecklai.com

http://www.mca.gov.in

http://icai.org

http://www.eximbankindia.com/

http://www.nseindia.com/

http://economictimes.com

Session Plan

Sessions 1‐2:

Overview: Introduction of Projects, Issues in Projects, Project and its Purpose, Critical Success Factors, Project Life Cycle, Case on Capital Budgeting. Readings: Ch 1 to 3 of PC; Ch1 of Finny. Session 3‐4 Project Cash Flow: Project Cash Flows, Projects with Different Lives, NPV v/s IRR Methods, MIRR, Projecting thCash Flow Statements. Reading: Ch 6 and 9 of PC Sessions 5‐6 Project Risk Appraisal: Identifying and assessing Risk‐ Break‐even, Sensitivity Analysis, and Application of RisMitigation Measures. Reading: Ch11 of PC and Ch 13 of Finny Sessions 7‐8 Project Risk Estimation: Risk Adjusted Rate of Return, Certainty Equivalent Method, Decision Tree, Scenario Analysis, Simulation Reading: Ch13 of PC and Ch 5of Finny Sessions 9‐10 Cost of Capital: Estimating hurdle rate for projects, Project selection techniques, Estimating levered and un‐levered beta: Hamada’s Paper Readings: Ch10 of PC Harward Business Publishing Case: Midland Energy Resources Incorporation: Cost of Capital Sessions 11‐12 Multinational Capital Budgeting: Motives for foreign investment, Complexities of foreign currency changes in project cash flows versus parent cash flows. Impact of inflations on cost of capital Reading: Ch. 14‐15 of Finny Session 13 Replacement Models for Project Assets: Different Replacement Models, Application of DCF Techniques for SuchProjects Reading: Ch13 of PC Session 14 Innovative Techniques in Projects Estimation: Application of Real Options Concept in Project Reading: Ch 26 of PC; Ch 11 of Finny Session 15 Infrastructure Projects: Different Types of Infrastructure Project Financing with special emphasis on Public Private Partnership Reading: Ch. 19 of PC; Ch 15‐16 of Finny Sessions 16: Project Presentations

Security Analysis & Portfolio Management

Course Objective

The objective of the course is to study theory and empirical evidence relevant for security analysis & portfolio management. An emphasis is placed on understanding how an investment professional would allocate funds in a hypothetical portfolio. Major topics include estimation of capital market parameters, trade-off between risk and return, optimal portfolio selection, equilibrium asset pricing models, security valuation and delegated portfolio management. Emphasis will be given on development of techniques that should be part of the tool kit of those interested in becoming professional investors and/or researchers in finance. The course is tilted heavily towards equity markets since there are separate courses that cover fixed income markets and derivative securities. This course is designed to primarily address the needs of advanced students in a PGDM program. In addition, the course will examine the role and performance of portfolio managers and mutual funds and how to evaluate whether these are value adding to investors. a. To develop an understanding of the over-all financial market, how it works and the relation between

risk and return. b. To develop an in-depth understanding of the valuation of equity instruments. c. To use the information about the macroeconomic and industry specific information for better

financial decision making (choosing the best possible investable instruments under a particular economic scenario).

d. To understand the technical trading indicators that can be used for investment decision and role of human emotion in the formation of equity prices.

e. To critically analyze the practical investment aspect and the real world investment management practice.

Course Format

The lectures will focus on the major points introduced in the textbook. We will draw on related academic research and books and articles by successful practitioners to illustrate some of the concepts being discussed. The lectures will not provide an exhaustive coverage of all topics in the text book. Prior to each class, students are expected to read the relevant textbook chapter and any additional assigned readings. You are encouraged to ask questions and to be an active participant in class. You are expected to attend class regularly and to come to class on time.

Learning Outcomes

On successful completion of the course, students should be able to:

ix. Discuss the objectives of security analysis and the key drivers of shareholders value. x. Critically analyze and understand the macroeconomic and industry aspect of equity valuation. xi. Perform in depth analysis of financial markets and how it is functioned. xii. Calculate the valuation of different financial instruments and analyze the risk and return

associated with it. xiii. Evaluate alternative valuation strategies from the view point of a fund manager. xiv. Understand SEBI guidelines concerning investor protection.

xv. Demonstrate techno-savvy capabilities to make effective presentations of your financial analysis.

xvi. Understand how mutual fund industry works and how to measure the performance of mutual funds for future investment purpose.

xvii. Understand how to perform the fundamental and technical analysis for a particular stock. Pre-requisites

The students enrolled in this course are assumed that they read thoroughly Corporate Finance I courses and have successfully completed the same.The readings from the text will be supplemented by other materials such as relevant news articles, academic journal articles and readings from supplementary books mentioned in the course outline. I recommend regular reading of a financial publication like The Economics Time, Business Standard, Wall Street Journal to stay abreast of current developments in the financial markets.

Grading:

1. Quiz (Best of 2) 20% 2. Project/Assignment and Presentation 20% 3. Case Analysis 10% 4. End Term 50%



Weight

Intended learning objectives to be assessed

a b c d e Case analysis / assignments (2x5 marks)

10% √ √ √ √ √

Quizzes/Mid Term

20% √ √


50% √ √ √ √ √


20% √ √ √ √

Projects & Presentation: The projects are intended to give some hands-on familiarity with investments data and to provide some experience and insight into applying quantitative techniques useful in investment analysis. The project consists of 3 to 4 take home assignments. The name of the projects will be announced in the class after covering the subsequent topic. All the projects are group project. Group can be made with 4 to 6 students. If you choose to complete them in a group, please submit one copy for the entire

group, noting the names of all group members. You do need to stick to the same group throughout the trimester. Each group has to submit the excel sheet (soft copy) and a word document (hard copy) before the deadline given. Delayed submission will not be entertained. Mention clearly the sources of all data and information. Also note that cut-paste from available reports will be penalized heavily. It might even lead to rejection of the report.

Text Book:


1. Bodie, Kane, Marcus, and Mohanty, Investments, Eighth Edition. TMH publication.

Supplementary Readings

6. Reilly & Brown, Investment Analysis & Portfolio Management, Cengage Learning. 8e. 7. J. Elton and M. J. Grubber, Modern Portfolio Theory and Investment Analysis 8. Gordon J. Alexander and William F. Sharpe, Fundamentals of Investments. 9. Security Analysis and Portfolio Management :Prasanna Chandra Tata McGrawhill. 10. Investment Analysis & Portfolio Management: Fischer and Jordon, Prentice.

Journals

• Journal of Finance • Journal of investment skill and portfolio management • Journal of Financial Markets • Journal of Empirical Finance • Journal of Banking and Finance • Journal of Emerging Market Finance • The European Journal of Finance • Wall Street Journal

In addition to above mentioned journals, please keep track of other journals, websites, published articles and papers on Security Analysis and Portfolio Management. Websites

Useful websites to be visited for the course. Useful website of the stock exchange, commodity exchange and regulators.

www.rbi.org.in www.bseindia.com www.nseindia.com www.sebi.gov.in www.ibef.org www.indiastat.com www.amfi.com Useful websites for company and industry data

www.seekingalpha.com www.icicidirect.com www.valuenotes.com www.in.finance.yahoo.com

www.equitymaster.com www.myiris.com www.sify.com www.world-exchanges.org knowledge.wharton.upenn.edu/india www.gmo.com www.ft.com www.mutualfundindia.com www.personalfn.com www.navindia.com Detailed List of Topics

The following is a detailed list of some of the major topics that are proposed to be covered in this course. Based on the progress of the class, changes (additions or deletions) may be made to this list.


Session 1-2: Introduction of Investment Analysis

Learning Outcome

• Markets and their functions

• Primary Vs. secondary markets

• Introduction to investment analysis

• Stock market indices

Readings/Handouts: Text Book Part I (Chapters 1 and 2)

Session 3- 6: Portfolio Theory

Learning Outcome

• Risk & return

• Asset allocation between risky assets and risk free assets

• Portfolio diversification and portfolio risk

• Markowitz efficient frontier.

• CAPM, SML & CML

• Efficient market hypothesis

• Multifactor models

Readings/Handouts: Text Book Part II and III (Chapters 5 - 11)

Session 7 – 10: Investment Analysis and Valuation Techniques

Learning Outcome:

• Macroeconomic and industry analysis

• Intrinsic valuation

• Relative valuation models

• Residual valuation models

• Value investing

• Relation between Corporate Governance and Valuation

Readings/Handouts: Text Book Part V (Chapters 17 - 19)

Session 11-13: Behavioral Finance and Technical Analysis

Learning outcome:

• Technical analysis

• Behavioural equity pricing

Readings/Handouts: Text Book Part III (Chapter 12)

Session 14-15: Portfolio Management

Learning outcome:

• Active portfolio management

• Portfolio performance measurement

• Passive portfolio management style

Readings/Handouts: Text Book Part VII (Chapters 24, 27)

Session 16: Project Presentation

Treasury Analytics

The importance of the treasury analytics is growing in business transactions due to exposure of various kind of risk involved in it. Risk mitigation, exposure management and the uses of hedging strategies are all now considered essential. Treasury managers must be able to use and apply financial products in order to maximize profit along with minimizing risk. With the ever‐increasing range and complexity of available financial instruments and derivatives, treasury analytics professionals must constantly update their skills in order to effectively undertake their crucial duties. This course prepare students in enhancing their skills to deal with key functions in foreign exchange management, risk management, asset liability management and financing activities. This course includes the discussion of various risks involves in treasury function and their management with the help of case studies, practical data etc.

Learning goals: This course aims at providing the detailed application of various tools in finance to manage the different types of risk associated with financial assets and a comprehensive understanding of how to manage treasury affairs with a detailed look at the various financial markets and instruments that can be traded.

Learning outcomes: After this course the participants will be able to:

• Understand the overall risk measurement framework • Recognize the types of risk associated with the financial assets. • Quantify the risk • Identify and execute the best method to hedge the risk associated with the financial assets. • Design the OTC derivative instrument with its valuations

Teaching Pedagogy

The pedagogy will be a mix of lectures, critique of readings/articles, case discussion, assignments and data analysis using software. The course uses data and cases as the means to drive the contextual suitability of treasury analytics. Besides the readings in the course pack, additional reading material will be distributed in the class from time to time.


i. Prerequisite to this course is the learning derived from ‘Derivatives’ and ‘Security Analysis and Portfolio Management’ courses.

ii. Since much of the course material requires class discussion, it is important that you are prepared for the class and present and defend your ideas. Preparation for class includes having read the assigned material.

iii. The class will be divided into a number of groups and each group will have 4‐5 students. For all projects and assignments, each group will submit analysis report and power point presentation one day before scheduled class.

iv. Evaluation for this assignment will be done based on individual as well as group performance. v. Class participation will be based on the value you add to the class through your creating learning

environment in class by raising intelligent questions, relevant statements on questions raised by others, and maintaining class decorum.


Students will be evaluated on the basis of case analysis, project, assignments, class participation, mid-term and end-term exam. The weightages given to each of these units is listed below: Course Evaluation

• Assignments (2) 20% • Project report 20% • OLT Quiz 20% • End Term Exam 40%

Project Evaluation

• Group Project proposal presentation 30% • Group Project presentation 30% • Group Project Report submission 40%


Weightage Intended subject learning outcome to be assessed

Group Assessment Methods

1.1 1.2 1.3

Group Project Proposal Presentation

30% √ √

Group Project Presentation

30% √ √ √

Group Project Report Submission

40% √ √ √

Group Case analysis submission

15% √ √

Group Assignments 15% √ √

Individual Assessment Methods

Mid Term Exam 30% √ √

End‐term Exam 40% √ √

Guidelines for Group Project

The group project will be one of the most important learning tools of the course. Each group will comprise of 5 students.

The project work should preferably be a practical issue, which requires a high degree of analysis and tangible recommendations. Your group is required to identify a company as well as project. Some projects are identified at the end of this note. The deliverables of the project include:

1. Project proposal 2. Data Collection 3. Final Report along with data used (if applicable) 4. Presentation

Course Outline

Session 1: Explanation of the Treasury Function in an Organisation: Corporate and Bank/FI, What is Treasury Management? Structure of Treasury Management, Functions of Treasurer and Controller

Participants in the Clearing/Non Clearing areas in the Derivative Market, Central Counterparty, Clearing House/Clearing Member/Clearing Broker, Swap Dealer

Session 2 & 3: Market Risk – Value At Risk: Methods of calculating VaR – Historical, Parametric VAR, Simulation, Monte Carlo Simulation, Bootstrap VAR, Liquidity VAR, Credit VAR , Stress Testing.

Session 4: Option Greeks, Delta, Gamma and Vega hedging and designing an immunized portfolio.

Session 5: Valuation of OTC Derivative Instruments ‐ Case Studies: Valuations of futures and forwards (Commodity, stocks and currencies)

Session 6: Valuations of Equity and Equity Index Options using Black Scholes Model, Binomial Tree Method and Taylors Series Method. KMV Model, Merton Model, Real options.

Session 7: Zero Rates, Forward Rates, Forward Rate Agreements (FRA’s), Valuations of FRA’s.

Session 8: Swaps ‐ Interest Rate swap, Cross Currency swap, commodity swap, variance swap and correlation swap, Valuations of Swaps using bond pricing and FRA methods.

Session 9: Introduction to the Credit Derivatives Market: . CLO, CBO, CDO etc, SPVs., CDS, Players in the CDS market, Interpretation of CDS Spreads/Index, Valuations of CDS, Total Return Swap, Caps, Floors, Collars, Captions, Swaptions., Copula Functions

Session 10: M&A Analytics, Market response model, Hypothesis of Deal financing in M&A,

Session 11‐12: Volatility Modelling with GARCH models. T GARCH, P GARCH, M GARCH, Component GARCH, Dynamic Conditional Correlation.

Session 13‐14: Asset Liability Management, Understanding Balance Sheets from ALM perspective, Gap Management, Duration Gap Analysis, Duration and Convexity Matching, Portfolio Immunization, Earnings at Risk, Cash Flow at Risk

Session 15 & 16: Project Presentations

Project Proposal Format

Your proposal should include following:

• Introduction/Background of the project • Rational for taking the project • Objective of the study • Scope of the study • Methodology (provide flow diagram) • Expected outcome • Project schedule/ timeline of progress

Guidelines for Presentation

• The presentation should cover both the analysis of primary and secondary data, as applicable. • Each presentation will be of 10 minutes with 8 minutes given to the group to highlight the key findings and

2 minutes for open discussion in the class. • Additional assignments would be given during the course.

Financial Econometrics


The course is a gateway to econometric modelling and applications in finance. Financial econometric is a tool to help in understanding and analysing the finance better. The subject eases the processing the financial information for various decision making purposes. Of late, modern tools and techniques have become necessary to know the complex financial products and their behaviour in the markets.

The course is intended to deliver the following objectives to;

• Understand econometric concepts for modelling • Critically analyse the situation for forward thinking with innovation (Programme obj‐3.1) • Perform various diagnostic checks to establish the model • Report the results/outcomes and their managerial implication • Demonstrate techno‐savvy analytical capabilities (Programme obj‐3.2)

Teaching Pedagogy

The pedagogy will be a blend of lectures, critical articles, case discussion and assignments. A well formed course pack will be given. The course employs chapters of the course pack as the means to link the theory with practices. Every theoretical session will be followed by hands-on session to appreciate the concepts by applying them. Data sets for the hands-on exercises are to be downloaded from the folder FE folder within the ‘Hands-Out’ available in the common server.


Students will be evaluated on the basis of quizzes, end term, final project presentation and submission, and class participation. The weightage given to each of these units is listed below:

Evaluation Criteria

• Quizzes (3) 30% • End Term 30% • Final project Submission 20% • Project presentation 10% • Class participation 10%

Assignment Evaluation

Final assignment is to be done and presented in a group of 4-5 members. The group should be formed after the second session. Each group has to select a commodity/index/stock/currency etc. which may be given by the instructor. Each group is expected to present all the concepts and analysis discussed in the class. Assignment presentation would be evaluated based on the concepts and coverage, depth of analysis, presentation skill and question & answer.

Class Participation

As this course is centred around both theory and hands-on, so active classroom participation is expected from every student. Those who will present would definitely be categorised as active class participation.

Evaluation Type Weightage Intended programme objective (students’ learning outcome)

Group Project Programme Objective-3.1

Programme Objective-3.2

Group project submission 20% √ √

Group project presentation

10% √ √

Project Submission Guidelines

• Each individual has to submit the project in hard copy. • The commodity/index/stock/currency to be analysed should be based on the concepts of

econometrics. • The application of concepts discussed in the class is expected to be reflected on the project. • Help/support from external resources can be sought provided you duly acknowledge them by writing

the source. • Each submission should carry the name, roll number and the project title. • The font should Times New Roam and font size should be 12 and should be properly (Justify) aligned. • All the tables, pictures and graphs should be presented in the last section, i.e. Appendix.

Guidelines for Assignment Presentation

• The presentation should be based a proper flow. • The rationale for choosing the commodity/stock/currency/index etc. and the country should be

justified. • The data collected should be properly analysed and presented. • Each presentation has to finish off by 25 minutes. First 10 minutes for the background information,


Session Plan Session 1: Overview of Classical Linear Regression Model (CLRM)

Session 2: Hands-on exercise on the data sets

Session 3: Further Developments and Diagnostic Tests of CLRM (Programme obj-3.1)

Session 4: Hands-on exercise on the data sets

Session 5: Problem of Heteroscedasticity (when the error variance is non-constant) & Autocorrelation (when

the error terms are correlated) (Programme obj-3.1)

Session 6: Hands-on exercise on the data set (Programme obj-3.1)

Session 7: Concepts of Time Series –Tests of stationarity, unit root, Univariate Time series modelling

(Programme obj-3.1)

Session 8: Hands-on exercise on the data sets (Programme obj-3.2)

Session 9 & 10: Modelling Volatility (Programme obj-3.1)


Session 12 & 13: Multivariate Time Series Modelling- Vector Auto Regression (VAR), Co-integration, Error

Correction Modelling (ECM). (Programme obj-3.1)


Session 15 & 16: Assignment Presentation

Books for reading

Basic Econometrics by Damodar N. Gujrati & Sangeetha

Introduction to Econometrics by G S Maddala

Introductory Econometrics for Finance by C. Brooks

Applied Econometric Time Series by W. Enders

Financial Econometrics by C. Gourieroux & Joann Jasiak

Practical Financial Econometrics by C. Alexander

Web Links

www.sebi . gov.in

www.mcxindia.com

www.ncdex.com

www.nseindia.com

www.bseindia.com

Software/Tools

Excel , Eviews-6, & R (tentative)

Financial Services

Course Objectives:

India has emerged a strong economy in recent years. In the current vibrant state of Indian economy, service sector is taking the leading role. Corporate India is scaling new heights not only in domestic but also in Global Markets. Hence the role of Investment Banking Services has taken the centre stage. Financial Services sector, undoubtedly, is the most happening place. Hence, a basic knowledge of Financial Services is required for every student pursuing a management course particularly specializing in Finance and Marketing. This knowledge helps a manager to better understand the intricacies of the existing corporate environment.

Learning Outcomes:

At the end of the course, students should be able to evaluate and decide about:

1. Leasing and Hire Purchase 2. Venture Capital 3. Factoring 4. Housing Finance 5. Securitization 6. Insurance Products

Besides exposure to a wide range of other services, this would help students become conceptually strong.



e. Demonstrate technical and analytical capabilities in Indian and global context. [Goal 1.1] f. Demonstrate effective communication skills. [Goal 1.2] g. Critically analyze situations to suggest innovative future growth opportunities [Goal 3.1] h. Demonstrate techno‐savvy capabilities to manage integrated environments. [Goal 3.2] Course Format

The lectures will focus on the major points introduced in the textbook, and will draw on related academic research, books, and articles by successful practitioners to illustrate concepts. Prior to each class, students are expected to read the relevant textbook chapter and any additional assigned readings. You are encouraged to ask questions and to be an active participant in class. You are expected to attend classes regularly and come to the class on time.

Evaluation

Assessment Method Weight

Quizzes : 20% End Term Examination : 50% Group Project/assignments : 20% Class participation : 10%

Alignment of evaluation process with Learning Outcomes: The course will aim at achieving the above learning outcomes in alignment with the goals of the PGDM program at IMT:


Weight

Intended learning objectives to be assessed a b c d

Quizzes/Mid Term

20% √


50% √ √


20% √ √ √

Class participation 10% √ √ Teaching Pedagogy

The pedagogy will be a mix of lectures, case discussion and assignments.



Guidelines on student’s workload: This course requires an estimated 60 hours of student effort, including the time for class participation, reading of the text and other suggested materials, work‐out problems and cases, preparing for quizzes and exams, assignments and projects. Books and References (Latest Edition): Text Book: Financial Services – M.Y.Khan, Tata McGraw Hill. Referred as MYK Other Readings:

1. Financial Institutions and Markets- L. M. Bhole, Tata Mcgraw Hill 2. Management of Financial Services- V. K. Bhalla 3. Financial Markets and Financial Services- Vasant Desai 4. Corporate Finance- Ross, Westerfield and Jaffe 5. Investment Banking: An Odyssey in High Finance – Pratap Subramanyam,

Note: Additional readings and cases may be announced during the course.

On line resources

http://www.bseindia.com http://www.nseindia.com http://www.sebi.gov.in http://www.finmin.nic.in http://www.moneycontrol.com http://www.mca.gov.in http://icai.org http://www.eximbankindia.com/

Session Plan

Sessions 1:

Overview: Course Introduction. Financial Markets and Services. Fee Based and Fund Based Services.

Readings: MYK Ch 1

Session 2‐3

Regulatory Framework: Regulatory Framework, SEBI Guidelines on New Issues Market (IPO), Underwriting, Issue Management, Issue Pricing and Issue Timing, Listing and Trading in Exchanges.

Reading: MYK Ch 13‐14

Sessions 4‐6

Leasing: Operating and Financial Lease, Perspectives of Lessor and Lessee, Lease Rentals, Comparison of Leasing & Buying, Leasing vs. Buying – Decisions.


Sessions 7

Hire Purchase: Concept of Hire Purchase, Its Financial Evaluation ‐ Company's & Hirer angle. Leasing v/s Hire Purchase

Readings: MYK Ch 5

Sessions 8‐9

Factoring and Bills Discounting: Concept of Factoring; Forms of Factoring; Financial Evaluation of Factoring; Creation, Discounting and Types of Bills of Exchange; Factoring vs. Bill Discounting.


Sessions 10‐11

Housing Finance Services: Introduction, Factors Considered for Lending Housing Finance, EMI Computations, Product Pricing with Fixed and Floating Rate Options ‐ re‐financing.

Reading: MYK Ch 8

Session 12‐13

Securitization & Mortgages: Securitization as Mode of Funding, Types of Securitization, ABS and MBS, Debt Waterfall Concept, Tranching and its Instruments, Application of Securitization in India.

Reading: Hand‐outs would be given at appropriate time

Session 14

Venture Capital: Introduction, Entry and Exit Points for VCFs, Private Equity, Working and Current Status of VCFs in India.

Reading: MYK Ch 10

Session 15

Insurance Services: Evaluation of NSP of a Typical Insurance Policy, Life Insurance and General Insurance

Reading: MYK Ch 9

Sessions 16‐17: Project Presentations

Financial Statement Analysis and Business Valuation

Course objectives:

To use financials statement information in a variety of business analysis and valuation context. To use, analyse and highlight the content of financial statements for determining earning quality in

the backdrop of GAAP for equity and business valuation. To integrate accounting concepts and principles with those of concepts of finance.

Course Format

The lectures will focus on the major points introduced in the textbook. I will draw on related academic research and books and articles by successful practitioners to illustrate some of the concepts being discussed. The lectures will not provide an exhaustive coverage of all topics in the text book. Prior to each class, students are expected to read the relevant textbook chapter and any additional assigned readings. You are encouraged to ask questions and to be an active participant in class. You are expected to attend class regularly and to come to class on time.

Learning Outcomes

On successful completion of the course, students should be able to:

• Discuss the objectives of security analysis and the key drivers of valuation.

• Understand the differences in valuation methodologies for various industries.

• Perform in depth fundamental analysis of companies and market valuation.

• Demonstrate techno-savvy capabilities to make effective presentations of your financial analysis.

• Understand various market nuances while performing valuation exercise

PRE-REQUSITE: Basic Financial Accounting Concept along with the understanding of corporate finance theory like

capital budgeting, capital structure, cost of capital and dividend decisions.

The readings from the text will be supplemented by other materials such as relevant news articles,

academic journal articles and readings from supplementary books mentioned in the course outline. I

recommend regular reading of a financial publication like The Economics Time or Business standard

to stay abreast of current developments in the financial markets.

Grading:

1. Quiz 20%

2. Project 20%

3. Assignment/ Case/Class Participation 10%

4. End Term 50%



Weight

Intended learning objectives to be assessed a b c d e

Assignment/Cases/Class Participation

10% √ √ √ √ √

Quizzes/Mid Term

20% √ √


50% √ √ √ √


20% √ √ √ √

PROJECTS & PRESENTATION:

The projects are intended to give some hands-on familiarity with investments data and to provide some experience and insight into applying quantitative techniques useful in investment analysis.

The project consists of 3 to 4 take home assignments. The name of the projects will be announced in the class after covering the subsequent topic. All the projects are group project. Group can be made with 5-8 students. If you choose to complete them in a group, please submit one copy for the entire group, noting the names of all group members. You do need to stick to the same group throughout the trimester. Each group has to submit the excel sheet (soft copy) and a word document (hard copy) before the deadline given. Delayed submission will not be entertained. Mention clearly the sources of all data and information. Also note that cut-paste from available reports will be penalized heavily. It might even lead to rejection of the report.

Text Book:


1. Stephen Penman. 2007. Financial Statement Analysis and Security Valuation. 3rd ed, McGrawHill.

Supplementary Readings 1. Damodaran on Valuation: Security Analysis for Investment and Corporate Finance (Wiley

Publications)

Journals:

Journal of Finance Journal of investment skill and portfolio management Journal of Financial Markets Journal of Empirical Finance Journal of Banking and Finance Journal of Emerging Market Finance The European Journal of Finance Wall Street Journal

In addition to above mentioned journals, please keep track of other journals, websites, published articles and papers on Valuation.

Websites Useful websites to be visited for the course Useful website of the stock exchange, commodity exchange and regulators. www.rbi.org.in www.bseindia.com www.nseindia.com www.sebi.gov.in www.ibef.org www.indiastat.com Useful websites for company and industry data www.seekingalpha.com www.icicidirect.com www.valuenotes.com www.in.finance.yahoo.com www.equitymaster.com www.myiris.com www.sify.com www.world-exchanges.org/ knowledge.wharton.upenn.edu/india/ www.gmo.com www.ft.com

COURSE OUTLINE


Session 1-2: Overview of Financial Statements

Learning Outcome

The Financial Statements: Income Statement, Balance Sheet, Statement of Cash Flows, etc. Measurement in the Financial Statements Comparisons using Financial Statements

Readings/Handouts: Text Book - Chapter 1,2

Session 3-6: How Financial Statements are used in Valuation Learning Outcome

Multiple Analysis Asset Based Valuation Fundamental Analysis The Architecture of Fundamental Analysis Dividend Discount Model

Readings/Handouts: Text Book - Chapter 4,5,6

Session 7-10: The Analysis of Financial Statements Learning Outcome

Analysing Profitability Effect of Leverage Drivers of Profitability Analysing Growth and Sustainable Earnings Valuation of Operations and Analysis of Price to Book Ratios Forecasting and Valuation with Balance Sheets Modifying Residual Earnings The Cost of Capital in Valuation.

Readings/Handouts: Text Book - Chapter 7,8,9,10

Session 11-13: Forecasting And Valuation Analysis

Simple Forecasting and Simple Valuation Simple Forecasts and Simple Valuation Simple Forecasts of Growth Return on Net Operating

Assets The Applicability of Simple Valuations Simple Valuation as an Analysis Tool

Readings/Handouts: Text Book - Chapter 13,14,15

Session 14-16: Accounting Analysis And Valuation Creating Accounting Value and Economic Value Value Creation and the Creation of Residual Earnings Accounting Methods, P/BRatios, P/E Ratios

Readings/Handouts: Text Book - Chapter 16,17

International Financial Management

Course Objectives:

This course aims at providing an insight into the operations and functioning of international capital and foreign exchange markets, as well as providing a conceptual framework for financial decision making from a global perspective so that multinational enterprises can pursue international strategic opportunities and meet future risks and challenges successfully. The concepts developed in the finance core courses of the previous terms, particularly corporate finance, will be heavily utilized. The course would focus on how companies engaged in international business can evaluate foreign investment projects, raise cost effective funding from global equity and debt markets and manage foreign exchange risk. The course would also help develop an in‐depth understanding of the complexities and issues related to working capital management in MNCs and international transfer pricing.

Learning Outcomes:

At the end of the course, students should be able to:

1. Discuss the functioning of foreign exchange markets and factors that determine foreign exchange rates.2. Understand the complexities involved in, and techniques of, the financial evaluation of foreign

investment projects. 3. Analyze the pros and cons of the main hedging techniques used to manage the foreign exchange risk. 4. Explain the main global sources of equity and debt financing and the issues related to the cost of capital

and financial structure in MNCs. 5. Understand the issues related to working capital management in MNCs and international transfer pricing.6. Demonstrate teamwork ability and develop verbal and writing communication skills.



i. Demonstrate technical and analytical capabilities in Indian and global context. [Goal 1.1] j. Demonstrate effective communication skills. [Goal 1.2] k. Critically analyze situations to suggest innovative future growth opportunities [Goal 3.1] l. Demonstrate techno‐savvy capabilities to manage integrated environments. [Goal 3.2]

Course Format

The lectures will focus on the major points introduced in the textbook, and will draw on related academic research and books and articles by successful practitioners to illustrate concepts. Prior to each class, students are expected to read the relevant textbook chapter and any additional assigned readings. You are encouraged to ask questions and to be an active participant in class. You are expected to attend class regularly and come to class on time.

Evaluation Assessment Method Weight Quizzes/Mid Term : 20% End Term Examination : 50% Group Project/assignment : 20% Class participation/case analysis : 10%



Weight

Intended learning objectives to be assessed A b c d

Quizzes/Mid Term

20% √ √


50% √ √


20% √ √ √

Class participation/Case analysis

10% √ √ √

Guidelines on case analysis:

A number of cases will be used in this course. Cases are a great educational experience but to derive maximum learning value from them, you must be fully prepared with your analysis and come to the class ready to discuss the issues taken up in the case.

For each case, you should:

e. Identify the major problem, f. Give your recommendation to resolve this problem (both short and long term), and when

appropriate g. Provide supporting analysis (both qualitative and quantitative) for your recommendations. h. Answer other questions provided for each case.

The class will be divided into a number of groups. For assigned cases, each group will submit the case analysis report and power point presentation one day before scheduled class.

Guidelines on Quizzes and Exams:

The examination format might be a combination of work out problems, case-analysis, MCQs and essay-type questions. These questions will be designed to test your skills to critically analyze issues under consideration and your ability to solve problems using conceptual knowledge and innovative ideas. Due weight will be given to quality of organization and presentation of answers in exams. The examination will be on topics covered prior to the examination date. The end-term exam will not have MCQs. All tests and exams will be closed-book. You may use a simple non-programmable calculator. Notebook computers, electronic dictionaries, cell phones and other personal communications devices are prohibited. Borrowing/lending of any item in the exam is strictly prohibited.

Guidelines on Group Projects Students may form their own groups of not more than 6 members each group. Names with enrolment numbers of all your group‐members and 1‐2 contact‐emails for each group must be given to course instructor within two weeks of the start of the term. Student groups are encouraged to select their own project topic with approval of the course instructor. Groups should finalize their project title by the Third week of the term.

By the midterm each group needs to submit a brief description (3‐4 pages) of their project which may include: introduction/background of the study, the objective(s) of the study, the scope and methodology, likely conclusions and recommendation, and selected references.

As a part of the project, your group would tap primary/secondary sources of information and analyze the company/industry’s performance in relevant areas, study trends, investigate issues and problems facing the company, measures taken by the company/industry or the regulating authorities and also try to suggest how the company/industry could improve its future systems and performance.

Project presentations: Each group will be required to present their project work which should cover both the analysis of primary and secondary data, as applicable. Each presentation will be of 15 minutes with 10 minutes given to the group to highlight the key findings and 5 minutes for questions/discussion in the class.

The final project report: Final project report, incorporating the changes suggested during the project presentation, must be submitted latest by one week prior to the end‐term exam date, and should not exceed 30 pages. It should include the following:

• The Executive Summary • Introduction/Background of the study • The conceptual framework. • Existing system and/or the objective(s) of the study • Scope and Methodology. • Data collection • Data analysis • Conclusions and recommendation. • References. The above format may be modified as necessary.

Caution: Please note that plagiarism or cut‐paste from available reports will be penalized heavily. It might even lead to rejection of the report. Grading of the report will be done on the strength of the analysis and explanation therein, as well as quality of primary & secondary sources tapped. All group members must contribute to the project work; piggyback riders might be penalized.

Teaching Pedagogy

The pedagogy will be a mix of lectures, case discussion, assignments and field/library based research projects.



Guidelines on student’s workload: This course requires an estimated 60 hours of student effort, including the time for class participation, reading of the text and other suggested materials, work-out problems and cases, preparing for quizzes and exams, assignments and projects.

Books and References (Latest Edition):

Text Book:

David K. Eiteman, Arthur I. Stonehill and Michael Moffett: Multinational Business Finance, Pearson, 12th Edition.

Other Readings:

1. Madura Jeff, International Financial Management, South Western College Publishing, USA.

2. Apte PG, International Financial Management 5th Edition, Tata McGraw Hill, New Delhi.

3. Shapiro, A C, Multinational Financial Management

4. Jain PK, Peyrard Josette,Yadav SS –International Financial Management

5. Hazel Johnson‐Global Financial Institutions & Markets

6. Tandon D. ‐‐Forex and Risk Management –Skylark Publications

7. Vyuptakesh Sharan – International Financial Management – PHI Publication

Note: Additional readings and cases may be announced during the course.

On line resources http://www.rbi.org.in http://www.moneycontrol.com http://www.mecklai.com http://www.mca.gov.in http://www.saxobank.com http://www.fxstreet.com http://icai.org http://www.eximbankindia.com/ http://www.nseindia.com/ http://economictimes.com

Session Plan

Session Topic

Reading/Case/

Assignment

1 OVERVIEW: What is different about Global financial management? Theory comparative advantage. The globalization process. The current multinationfinancial challenges and the credit crisis of recent years.

Eiteman Ch 1

Apte Ch1

2

THE BALANCE OF PAYMENTS:

The Balance of payments: Ways to rectify a current account BOP deficit.

Case: Turkey’s Kriz (A)

Eiteman Ch 4

Apte Ch 4

India’s BOP performance.

3‐4

THE FOREIGN EXCHANGE MARKET

Functions and market participants, types of transactions and settlement dastructure of the Indian foreign exchange market, exchange rate computatio

Eiteman Ch.6

Apte Ch7

DETERMINATION OF FOREX RATES:

5 – 6

Determination of exchange rates: Purchasing power parity and the law of oprice, relative purchasing power parity, interest rates and exchange rates, tFisher Effect. Approaches to foreign exchange rate determination and forecasting. Exchange rates issues in emerging markets.

Case: Currency Pass Through at Porche

Eiteman Ch7 and 1

7 – 8

FOREIGN CURRENCY DERIVATIVES

Foreign Currency Futures, Currency Options,

Foreign Currency Speculation, Option Pricing

Case: Warren Buffet on Derivatives

Eitman Ch 8

9 – 10

FOREIGN EXCHANGE RISK:

Understanding foreign exchange risk. Types of exposures. Managing transactions, translation and operating exposure. Internal and External hedtechniques. Management of foreign exchange risk in the Indian context.

Case: Xian‐ Tanssen Pharma

Eiteman Ch 11‐12

Apte Ch 13 ‐ 14

11 – 12

MULTINATIONAL CAPITAL

BUDGETING: Motives for foreign direct Investment, Complexities of foreignprojects, project versus parent cash flows.

Adjusted NPV and other aspects.

Case: Trident Chinese Market Entry ‐ Real Options case

Eiteman Ch. 18‐19

13‐14 SWAPS AND HYBRIDS: Interest and

Currency swaps. International hybrid securities.

Eiteman Ch. 9

15 ‐ 16 Project presentations

Mergers, Acquisition and Corporate Restructuring

Course Objectives:

The key objective of the course is to give students a deep understanding of the life cycle of a Merger, Acquisition and Corporate Restructuring deal process.

The lectures and discussions will cover deal origination, strategies (both takeover

and defence), target valuation, deal execution, etc. The focus would be on understanding the role and the motivations of each participant. Finally, the students will understand frameworks (read regulation) dictating MARCs, risks involved and ways to control them.

Thus this course attempts to capture the entire spectrum of M&A activity and spell out the contours of the entire corporate restructuring process. From valuation to integration, the course is sure to help managers think through what such a strategic move would mean to the organization.

Focus will be made to provide working knowledge and skill of underlying concepts, contractual obligations, tax impact and legal background of M&A. Precisely, the course is designed to show business managers what kind of corporate restructuring can be worked out in the organization and how best to analyse, design and implement M&A deals.

Pedagogy

The course shall be delivered essentially through a fusion of lectures, exercises, and by discussing real cases to develop student’s ability to read and analyze them. Total 14 sessions of 1 hr 15 minutes each would be conducted Students are encouraged to interact with the faculty during the entire duration of course delivery and particularly during analyzing situations.

Course Requirements

• Since much of the course material requires class discussion, it is important that you are prepared for the class and present and defend your ideas. Preparation for class includes having read the assigned material.

• The class will be divided into a number of groups and each group will have 6 students. For all group assignments, each group will submit its recommendations/solutions meeting the deadlines specified by the faculty. Late submissions will not be accepted.

• As three quizzes on a best two basis will be taken, there will be no make‐up quizzes. • Class participation will be based on the value you add to the class through your questions, statement,

and comments. It is the quality of these that is more important than the quantity. • This course involves lots of numbers. Students are advised to bring to the class a calculator. • Mobile phones shall strictly be switched off before the start of each session. Silent mode is not

permissible to ensure focused learning. Laptops/tablets can be used by the students in the classroom only upon the instruction of the faculty.

Evaluation Quizzes : 20% (three quizzes on a best two basis) Class Participation : 10% Project/cases/assignments: 20% End Term : 50% Specific Assessment Method

Weight Intended objectives to be assessed

1 2 3 4 5 6 Quizzes 20% √ √ √ Class Participation 10% √ √ √ √ √ Project / Cases / Assignments 20% √ √ √ √ √ √ End Term Examination 50% √ √ √ √

Group Project

The group project will be an important learning tool of the course. It is essentially an application of the classroom learning. Each group will comprise of 6 students. The project shall be assigned by the faculty at the end of session 8. The project, while not being highly complicated, will require some deep thinking by the students before forming a conclusion.

Assignments

• Short Case Report: A short case report has to be submitted. • Additional assignments may be given during the course.

Text Book Mergers, Acquisitions, and Corporate Restructurings – Patrick A. Gaughan , Wiley Publication. Reference Books

• Mergers. Restructuring, and Corporate Control – J. Fred Weston, Kwang S. Chung, and Susan E. Hoag • Applied Mergers & Acquisitions – Robert F. Bruner • Valuation for Mergers, Buyouts, and Restructuring – Enrique R. Arzac

Journals

The Chartered Accountant Management Accountant Finance India Journal of Accounting and Finance

Relevant Websites

www . icai.org : ICAI www . my icwai.com :ICWAI www. Icsi .edu : ICSI www.clb.nic.in www.fasb.org www.iasb.org

Course Outline: Session/Module/Reading Material

Session 1: Introduction to Organic and Inorganic growth choices, Strategic approach to and different types of deals.

Reading: Ch. 5 of Mergers, Restructuring, and Corporate Control – Weston, Chung and Hoag

Reading: Ch. 4 of Mergers, Acquisitions, and Corporate Restructurings – Gaughan

Session 2: Acquisition Search and Deal Origination

Reading: Ch. 7 of Applied Mergers & Acquisitions – Bruner

Session 3: Valuation – Discounted Cash Flows for Stand‐Alone Firms

Readings: Chapter 2 of Valuation for Mergers, Buyouts, and Restructuring – Arzac

Chapter 3 of Valuation for Mergers, Buyouts, and Restructuring – Arzac

Session 4‐5: Valuation ‐ Economic Value Addition, Multiples

Readings: Chapter 4,5,6 of Valuation for Mergers, Buyouts, and Restructuring – Arzac

Session 6: Valuation of Synergy and Control, Cross Border deals

Readings: Ch. 11, 12 & 15 of Applied Mergers & Acquisitions – Bruner

Session 7: Leveraged Buyouts


Session 8‐9: Restructuring


Session 10: Joint Ventures & Strategic Alliances


Session 11: Take Over Tactics


Session 12: Anti‐Takeover Tactics


Session 13: : Deal Financing , Taxation and Regulation

Reading: SEBI Takeover Code

Reading: Chapter 7 of Valuation for Mergers, Buyouts, and Restructuring – Arzac

Session 14: Deal Design in M&A and Risk Management in M & A

Readings: Ch. 18 of Applied Mergers & Acquisitions – Bruner


Session 15: Negotiating in an M&A deal


Session 16: Project Viva

Working Capital Management

Course Background and Objectives:

Working Capital Management is the process of planning and controlling the level and mix of the current assets of the firm as well as financing these assets. Specifically, working capital management requires financial managers to decide what quantities of cash, accounts receivable, inventories and other liquid assets the firm will hold at any point in time. In addition, financial managers must decide how the current assets are to be financed. Financing choices include the mix of current as well as long‐term liabilities. The distinguishing feature of working capital decisions is that the planning horizon is relatively short. Therefore, working capital can be appropriately financed with short‐term funds, or long‐term funds, or a combination of the two.

In the management of working capital, the firm is faced with two key questions:

1. Given the level of sales and the relevant cost considerations, what are the optimal amounts of current assets a firm should choose to maintain?

2. Given these optimal amounts, what is the most economical way to finance these current asset investments?

To produce the best possible returns, firms should keep no unproductive assets, and should finance with the cheapest available sources of funds.

Students will learn to manage assets such as cash, accounts receivables, inventories; and also short term liabilities. They will be able to find answers to questions like: How should the firm manage its cash? To whom should the firm grant credit? How much inventory should the firm keep? The course focuses on the most advantageous ways of addressing the problems in the management of working capital. This course, therefore, endeavors to develop students through the following specific objectives –

1. To develop an understanding of the nature of working capital and its role in business decision‐making.

2. To be able to manage cash and prepare cash budgets.

3. To be able to administer receivables and formulate suitable credit policies.

4. To assess working capital requirements and to finance these requirements.

5. To critically analyze situations for forward thinking through innovation.

Pedagogy

The course shall be delivered essentially through a fusion of lectures, exercises, and cases. Total 16 sessions of 1 hr 15 minutes each would be conducted Students are encouraged to interact with the faculty during the entire duration of course delivery and particularly during analyzing situations.

Course Requirements

• Since much of the course material requires class discussion, it is important that you are prepared for the class and present and defend your ideas. Preparation for class includes having read the assigned material.

• The class will be divided into a number of groups and each group will have 6 students. For all group assignments, each group will submit its recommendations/solutions meeting the deadlines specified by the faculty. Late submissions will not be accepted.

• As three quizzes on a best two basis will be taken, there will be no make‐up quizzes. • Class participation will be based on the value you add to the class through your questions, statements,

and comments. It is the quality of these that is more important than the quantity. • This course involves lots of numbers. Students are advised to bring to the class a calculator. • Mobile phones shall strictly be switched off before the start of each session. Silent mode is not

permissible to ensure focused learning. Laptops/tablets can be used by the students in the classroom only upon the instruction of the faculty.

Evaluation

Quizzes : 20% (three quizzes on a best two basis)

Class Participation : 10%

Project/cases/assignments: 20%

End Term : 50%


Weight

Intended learning objectives to be assessed 1 2 3 4 5

Quizzes

20% √ √ √

Class Participation

10% √ √ √ √ √

Project / Group Assignments

20% √ √ √


50% √ √ √ √

Group Project / Assignments

The group project / group assignments will be important learning tools of the course. They are essentially applications of classroom learning. Each group will comprise of 6 students. The project / assignments shall be given by the faculty at appropriate junctures over the course duration.

Assignments

• Short Case Reports: A few short case reports have to be submitted. • Additional assignments may be given during the course.

Text Book

Working Capital Management; Krish Rangarajan, Anil Mishra; Excel Books

Reference Books

1. Essentials of Working Capital Management, James S. Sagner, Wiley 2. Financial Policy & Management Accounting, Bhabatosh Banerjee, PHI (EEE) 3. Financial Management, Khan & Jain, Tata McGraw‐Hill Publishing Ltd

Journals

The Chartered Accountant Chartered Secretary Finance India Journal of Accounting and Finance

Relevant Websites

www . icai.org : ICAI www. Icsi .edu : ICSI www.clb.nic.in

Course Outline: Session/Module/Reading Material

Session 1: Introduction to Working Capital

Introduction to working capital, Working Capital Operating Cycle, Determinants of working capital.

Readings: Working Capital Management; Krish Rangarajan, Anil Mishra; Excel Books, Chapter 1.

Session 2: Working Capital Policies

Working Capital Policies related to the level of current assets and to the financing of these assets.

Readings: Handout as would be given by the faculty

Sessions 3 – 7: Receivables Management

Receivables Management – Terms of payment, Credit Policy – Credit Standards, Credit Period, Cash Discount, and Collection Effort. Credit Evaluation, Control of receivables.


Sessions 8 ‐ 12: Cash Management

Cash Budgeting. Cash Management.


Session 13 ‐ 14: Inventory Management

Inventory Management ‐ Order Quantity, Quantity discounts, Order Point, Monitoring and Control of inventories.


Sessions 15 & 16: Assessment and Financing of Working Capital


2.finance and banking

Documents

commercial banking v

financial services

financial econometrics

financial statement

commercial banking background

study commercial banking

folder commercial banking

portfolio management