FINANCIAL INSTITUTIONS

Objectives:
After the completion of this course the students will:

Identify distinguishing nature of financing and investing decisions made by

different financial institutions.
Learn the skills of analyzing different aspects of a financial institution including
liquidity, leverage, profitability and efficiency aspects.
Know procedure to Manage interest rate risk and various techniques of structuring
the balance sheet for the purpose of managing the interest rate risk.

Course Outlines:

Role of Financial Markets and Institutions

Financial markets and efficiency
Securities traded in financial markets,
Financial market regulations
Financial institutions in financial markets.
Financial Markets
Instruments and yield
Money market instruments & capital market instruments
Bond equivalent yield, discount yield, annual yield
Importance of cost of funds and the return on different types of assets.
Money and Bond Markets
Institutional use of money markets
Commercial Banking
Bank sources of funds
Comparison of fund resources among bankers
Uses of funds by banks
Off-balance sheet activities
Prudential Regulations
State Bank of Pakistan Regulations for Financial Institutions
Bank Management

Managing liquidity

Managing interest rate risk, managing exposure to

default risk

Bank capital management

Management based on forecasts

Integrated bank management

Bank Performance
Performance evaluation of banks
Usage stock prices to assess performance potential,
Risk evaluation of banks, how to evaluate a banks performance
Performance Evaluation
Common size statements and trend analysis

 Measuring the liquidity position

Investment portfolio performance
Credit risk ratios
Asset utilization, profitability
Integrated model of profitability
Non-Bank Financial Institutions
Savings Institutions
Finance Companies
Leasing Companies, Insurance Companies
Compulsory Reading:
Madura, Jeff. Financial Markets and Institutions, Florida: Thomson Learning Inn.
Further Reading:
Thygerson, J. Kenneth. Financial Markets and Institutions (Latest Ed.),

INVESTMENT & SECURITY ANALYSIS

Objectives:
After the completion of this course the students will:

Learn different form of short term and long term investments

Understand the basic concepts about risks and return on investments and loans
Analyze overview of the structure and functioning of investment markets

Course Outlines:
1. Basics of Investment
Overall perceptive of investment
Importance of investment decision
Investment decision process
2. Investment Alternatives
Organizing Investment Alternatives
Marketable Financial Assets
Money market securities
Fixed income securities
Equity securities
Derivative securities
3. Indirect Investments
Types of investment companies
Types of mutual funds
Mechanics of indirect investment
Investment company performance
4. Securities markets
The Primary markets
The Secondary markets
Stocks market indexes
Bond markets
Derivatives market
5. Return and risks from investment
Returns
Risks
Total returns & Return Relative
Measuring risks and returns
6. Portfolio Theory
Dealing with uncertainty
Introduction to modern portfolio theory
Analyzing portfolio risk
The components of portfolio risk

 Calculating portfolio risks

7. Portfolio selection
Building Portfolio using Markowitz principles
Alternative methods of obtaining the efficient frontier
Optimal Assets classes
Diversification on risk
8. Assets pricing Model
Capital market theory
The Equilibrium return-risk trade off
The security market line(SML)
Estimation of SML
9. Common stock valuation
Discounted cash flow techniques
Relative Valuation Techniques
Analysis of common stocks
Building stocks portfolio
The Active & Passive Approach
10. Market Efficiency
The concept of market efficiency
Tests of market efficiency
Behavioral finance and market anomalies
Earning announcements
Compulsory Reading:
Jones, P. Charles. Investment Analysis and Management (10th Ed.).
Further Readings:
Mandel, L., and Thomas, J. O. Brian. Investments.