Financial Institutions and Markets – KASNEB Syllabus

PAPER NO.5   FINANCIAL INSTITUTIONS AND MARKETS

GENERAL OBJECTIVE

This paper is intended to equip the candidate with the knowledge, skills and attitudes that will enable him/her to make investment decisions based on the analysis of financial markets.

LEARNING OUTCOMES

On successful completion of this paper, the candidate should be able to:

  • Identify financial intermediaries available for investment
  • Calculate security market indices
  • Comply with financial market regulations
  • Trade financial securities in the financial markets
  • Understand the roles and functions of Unclaimed Financial Assets Authority and Financial Reporting

CONTENT

Market organisation and structure

  • Functions of financial systems
  • Classifications of assets and markets
  • Structure of financial markets
  • Major types, subtype and characteristics of securities traded in organised markets: currencies, contracts, commodities and real assets
  • Flow of funds and financial systems
  • Characteristics of a well-functioning financial system
  • Organic theory of financial markets
  • Definitive approaches to financial markets
  • Automation of security exchanges: Automated trading systems (ATS) and Central Depository System (CDS)
  • Internationalisation of financial markets

Marketing financial services

  • Challenges of marketing financial services
  • The consumer decision process in financial services
  • Categories of financial products and services
  • Pricing and advertising of products relating to financial services
  • Distribution of financial services; traditional channels of distribution; technology driven delivery channels
  • The process of new product introduction in financial services markets
  • Segmentation bases within financial markets
  • Customer satisfaction with financial services; building financial consumers relationship; consumer retention and loyalty

Financial markets

  • Money markets: purpose, participants, trading; money market instruments(treasury bills, commercial papers, negotiable certificates of deposit)
  • Bond markets: purpose, participants; bond market instruments(treasury bonds, municipal bonds, corporate bonds, structured notes, exchange-traded notes)
  • Equity markets: purpose, participants, Initial Public Offering(IPO),share offering and repurchases, market orders
  • Mortgage markets: purpose, participants,classification, types of residential mortgages, participants, mortgage market instruments
  • Foreign exchange markets: purpose, participants; forex market currency pairs
  • Derivatives securities markets: futures markets, forward markets, option markets and swap markets, purpose, participants and instruments

Security market indices

  • Security market index
  • Calculation and interpretation of an index value, price return and total return
  • Choices and issues in index construction and management: different weighting methods used in index construction
  • Index rebalancing and reconstitution
  • Uses of security market indices
  • Types of equity indices: price weighted index, value weighted index, equally weighted index and float adjusted weighted index, global equity indices
  • Types of fixed-income indices
  • Indices representing alternative investments
  • Comparison of indices over time

Market efficiency

  • The concept of market efficiency: definition and assumptions; importance of market efficiency to investment participants
  • Market value and intrinsic value
  • Factors affecting a market’s efficiency
  • Forms of market efficiency: weak form, semi-strong form and strong form; implications of each form of market efficiency for fundamental analysis, technical analysis and the choice between active and passive portfolio management
  • Random walk theory and efficient markets
  • Tests of market efficiency
  • Market anomalies :size effect, P/E ratio effect, day of the week effect (Monday effect), year- end or January effect, return patterns (value line enigma, quarterly earnings surprises), Fama-French value/market value

Financial intermediation and disintermediation

  • Introduction to financial intermediation and disintermediation
  • Challenges of financial intermediation and irregularities of markets commercial banks: Islamic banking, internet banking, agency banking, international banking
  • Savings and loans associations and co-operative societies
  • Foreign exchange bureaus
  • Unit trusts and mutual funds
  • Insurance companies and pension firms
  • Insurance agencies and brokerage firms
  • Investment companies
  • Investment banks and stock brokerage firms
  • Micro-finance institutions and small and medium enterprises (SMEs)
  • Syndication by commercial banks on the operations of the capital markets
  • Private equity firms
  • Financial advisory firms

Financial markets regulation

  • Asymmetric information and financial regulation: government safety net, restrictions on asset holdings, capital
  • Role of government in the financial system; capital markets authority (CMA), central bank, central depository and settlement corporation (CDSC)
  • Role of ICIFA in regulating investment and financial analysts
  • Financial supervision: chartering and examination, assessment of risk
  • Management, disclosure requirements, restrictions on competition
  • Financial liberalisation, stratification and rationalisation
  • Financial deepening
  • Banks runs and panics
  • The liquidity crisis

Informal finance

  • Introduction to informal finance
  • Sources of informal finance
  • Features of informal finance
  • Informal investment organisations
  • Challenges of informal finance

Unclaimed Financial Assets Authority and Financial Reporting center

  • Objectives
  • Functions and powers
  • Due diligence requirements

Emerging issues and trends



Leave a Reply

Your email address will not be published. Required fields are marked *