CAP-III SYLLABUS

Advanced Financial Management

(One Paper – Three Hours – 100 Marks)

Advanced Financial Management is the second paper of CAP-III. It  covers 100 marks in total. It is the Group 1 paper. The syllabus you need to cover in CAP-III under “Advanced Financial Management” is as follows: 

Level of Knowledge : Expert

Course objectives :

— To gain an expert knowledge of the advanced issues involved in financial management and the features of financial management in the global context.

Course contents for advanced financial management

 

The Financial System

—  Introduction, structure of a financial system

— Functions of financial management, equilibrium in financial markets, financial system and economic development, criteria to evaluate financial sector

— Financial development: concepts, the technology of the financial system: delegation, credit substitution, pooling, netting

 

Financial Intermediaries

— Depository institutions: commercial banks, near banks (including thrifts, finance companies and others), insurance, pension funds and mutual funds; their functions, issues and risks associated with their management

— The economics of regulation of financial services, structure of Nepalese financial markets and their regulation

— Credit rating agency: introduction, importance, functions, credit rating process, quality and integrity of rating, code of conduct

 

Capital Markets

 

—  Understanding securities markets; market for government securities

—  Money market: evolution, growth, money market and the economy

— Capital market: evolution, long-term finance and related issues, market for new issues, secondary market

—  Derivatives market: futures, options and swaps

 

Valuation of Assets, Shares and Companies

—  Introduction, the valuation problem, valuing a company using published accounts

—  Valuing shares: the dividend valuation model, valuing the earnings stream, using the DCF approach, shareholder value analysis, valuation of unquoted companies, Bond valuation

 

Investment Decisions and Strategies

—  Cost of capital, advanced concepts of capital budgeting

— Cash flow analysis using various methods, ranking mutually exclusive projects, investment evaluation and capital rationing

— Applications in project appraisal: incremental cash flow analysis, replacement decisions, unequal lives, risk and uncertainty

—  Effects of inflation

—  Financial and operating leverage

 

International Financial Management

— Financial management in a global context: the finance function and emerging challenges, the global financial markets

— Nature and management of exposure and risk: exchange rate and interest rate volatility, classification of foreign exchange exposure and risk, interest rate exposure and risk; balance of payments: basics, valuation, components; global financial markets and interest rates: domestic and offshore markets

— Overview of money market instruments; short-term borrowing in global markets; long-term borrowing in the global markets

—  International project appraisal, venture capital financing

Portfolio Theory & Assets Pricing

—  Efficient market theory, random walk theory

—  Markowitz model of risk return optimization: CAPM

—  Arbitrage pricing theory, sharp index model

— Portfolio management, formulation, monitoring and evaluation, equity management, principles and management of hedge funds, international portfolio management

Foreign Exchange Management

—  Introduction-foreign exchange market, market participants, exchange rate determination, exchange rate quotation, exchange rate forecasting, exchange rate theories , risk management

— Foreign exchange exposure, types of exposures, techniques for managing exposure, strategies for exposure management, hedging currency risk, provisions of Foreign Exchange Regulation Act 2019

 

Emerging Concept of Financing

— Lease financing; hybrid financing: preferred stock, warrants, and convertibles derivatives and risk management

—  Reorganization, mergers, leveraged buy-outs

—  Government finance, bail-out packages and other financial sector reforms program

—  Multinational financial institutions

 

Foreign Direct Investment

—  Costs involved and benefits derived

—  Foreign institutional investment

—  Instruments of international finance

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