International Accounting International Financial Reporting

Standards Board (IASB) Standards (IFRS)

Statements of Financial
Financial Accounting Standards Accounting Standards (SFAS)
Board (FASB) (US GAAP)
Setting and Regulatory Bodies
International Organisation of
Securities Commission (IOSCO)

Securities and Exchange

Commission (SEC)

Relevance

Completeness

Faithful Representation Neutrality

Qualitative Characteristics of Free from Error
Financial Statements
Comparability
Revenue and Expense Flows
Understandability
Basic EPS
Earnings per Share (EPS) Verifiability
Diluted EPS Components
Timeliness
Minority Interest Financial Reporting Standards
Balance Sheet
Single-step
Presentation Income Statement
Multi-step
Statement of Changes in
Risks and rewards transferred to
Owner’s Equity
customer
Components Statement of Cash Flows
Revenue and cost can be General Principles of Revenue
measured reliably Recognition Measurement Bases
Collection of revenue is Accounting Policies Accounting Methods
probable
Estimates and Assumptions
Expense Recognised After the Notes
Cash Outflow Occurs Key Assumptions
Income Statement
Expense Recognised Before the Other Disclosures
Expense Recognition
Cash Outflow Occurs
Fair Presentation
Warranties General Requirements for
Financial Statements Going Concern
Discontinued Operations
Non-recurring Items Principles Accrual Basis
Unusual or Infrequent Items
Consistency
Comprehensive Income
Materiality
Foreign Currency Translation
Aggregation of Similar Items
Gains/Losses
No Offsetting of Elements
Certain Cost Components
Associated With Defined Benefit Classified Balance Sheet
Plans
Other Comprehensive Income Minimum amount of info on face
Unrealised Gains/Losses on Presentation Requirements of financial statements
Derivatives Used for Hedging
Minimum amount of info in the
Unrealised Gains/Losses on notes
Certain Investments
Comparative Info must be
Inventory Turnover provided
Inventory
Days in Inventory Assets
Receivables Turnover Components Liabilities
Days in Receivables (Days Accounts Receivable
Equity
Sales Outstanding)
Reporting Format
Payables Turnover Formats
Activity Ratios Account Format
Days in Payables (Days Accounts Payable
Payables Outstanding Historic Cost
Measurement Bases
Working Capital Turnover Fair Value

Fixed Asset Turnover Cash

Total Asset Turnover Marketable Securities

Current Ratio Current Assets Accounts Receivable

Quick (Acid) Ratio Prepaid Expenses

Cash Ratio Liquidity Ratios Inventory

Defensive Interval Ratio Accounts Payable

Financial Statement
Cash Conversion Cycle Analysis (Part 1) Current Taxes Payable

Debt to Asset Unearned Revenue

Current Liabilities
Debt to Capital Notes Payable

Debt to Equity Current Portion of Long Term

Solvency Ratios Debt
Leverage Ratio
Property, Plant and Equipment
Balance Sheet
Interest Coverage Ratio Tangible
Investment Property
Fixed Charge Coverage
Copyrights
Gross Profit Margin Non-Current Assets Specifically Identifiable
Intangibles Patents
Operating Margin
Return on Sales Customer Lists
Pre-tax Margin Intangible
Unidentifiable Intangibles Goodwill
Net Profit Margin Profitability Ratios Deferred Tax Asset
Ratio Analysis
Return on Assets
Advance Payments from
Return on Total Capital Return on Investment Customers
Return on Equity Non-Current Liabilities Long Term Debt Due
Price/Earnings Deferred Tax Liability
Price/Cash Flow Fair Value through Profit and
Valuation Ratios (all per share) Loss Trading Securities
Price/Sales
Fair Value through Other
Price/Book Value of Equity Financial Assets
Comprehensive Income Available for Sale Securities
DuPont Analysis
Amortized Cost Held to Maturity Securities
Basic Earnings per Share
Contributed Capital
Diluted Earnings per Share
Retained Earnings
Cash Flow per Share
Accumulated Other
Components of Owner’s Equity
EBITDA per Share Comprehensive Income
Ratios used in Equity Analysis
Dividends per Share Minority Interest

Dividend Payout Treasury Stock

Retention Rate Cash Flow from Operations

(CFO)
Sustainable Growth Rate Financial Analysis Techniques
Cash Flow from Investing (CFI)
EBIT/Interest Expense Categories
Cash Flow from Financing
EBITDA/Interest Expense (CFF)
Funds From Operations/Total Differences between IFRS and Interest income/expense
Debt US GAAP
Dividends paid/received
Free Operating Cash Flow/Total Ratios used in Credit Analysis
Debt Direct method
Presentation of CFO
Total Debt/EBITDA Indirect method

EBIT/ Debt+Equity Free Cash Flow to the Firm’s

Providers of Capital (FCFF)
Total Debt/ Total Debt+Equity
Cash Flow Statement Free Cash Flow Free Cash Flow to the Firm’s
Common Size Analysis Providers of Equity (FCFE)
Segment Profit Margin CFO/Net Revenue
Segment Turnover CFO/Avg Total Assets
Segment Reporting
Segment Return on Assets CFO/Avg Shareholders’ Equity
Performance
Segment Debt Ratio CFO/Operating Income
Sensitivity Analysis CFO-Preferred Dividends /
Earnings Forecast using Ratio
Scenario Analysis Analysis Common Shares Outstanding

Simulation Analysis Cash Flow Ratios CFO/Total Debt

CFO+Interest Paid+Taxes /
Interest paid

CFO/Cash Paid for Long Term

Assets
Coverage
CFO/Long Term Debt
Repayment

CFO/Dividends Paid

CFO/Investing and Financing

Cash Outflows
 Raw Materials

Cost Components Work-in-Progress

Finished Goods

Specific Identification
Deferred Taxes
Weighted Average Cost
Tax Base Income Taxes Valuation Methods
FIFO
Valuation Allowance
LIFO
Recognition and Measurement
of Bonds Periodic
Inventory Inventory Systems
Financing Lease Perpetual
Leases
Operating Lease Impact of Inflation and Deflation

Defined Contribution Pension Non-Current Liabilities LIFO Reserve

Service Costs LIFO Liquidation

Interest Expense Market Value

Expected Return Defined Benefit Pension Net Realizable Value

Prior Service Cost Valuing Inventory Book Value

Actuarlia Gain/Loss Replacement Cost

Financial Statement Profit Margin

GAAP compliant/Decision
Useful/Sustainable and Analysis (Part 2) Capitalising vs Expensing
Adequate Returns
Internally Developed
GAAP compliant/Decision
Useful/Sustainability and Intangible Assets Purchased Externally
Adequacy of Returns is
questionable Business Combination
Reporting Quality Spectrum Straight Line
GAAP compliant/Biased
Accounting Choices Depreciation Methods Declining Balance
GAAP compliant/Earnings Units of Production
Management
Amortisation of Intangible
Departures of GAAP Assets
Long-Lived Assets
Opportunity Impairment of Assets Held for
Conditions Conducive to Issuing
Motivations Low Quality Reports Use

Rationalization Impairment of Long-Lived

Financial Reporting Quality Assets Held For
Regulation Impairment
Mechanisms Disciplining Impairment of Intangible Assets
Auditors Reporting Quality with Finite Lives

Private Contracting Impairment of Intangible Assets

with Indefinite Lives
Influencing Analyst’s Opinion
De-recognition of Long Term Sale of a Long Term Asset
Impacting of Accounting
Methods on Financial Assets Disposal of Long Term Assets
Statements other than through Sale

Accounting Warning Signs

 Coupon

Face value
Overview
Maturity

Yield

World Bank
Supranational Organisations
IMF

Sovereigns
Issuers Municipals

Quas-govt. Organisations

Corporations

Seller or Originator Currency Denomination

Special Purpose Vehicle Subordination

Parties Involved
Servicer Internal Overcollateralization

Trustee Excess Spread

Credit Enhancements
Time Trenching Guarantees
Structure
Credit Trenching External Letter of credit
Bond Indenture
Maturity Cash collateral account

Interest Rate Structure Affirmative covenants

Covenants
Amortization Schedule Residential Mortgage Loans Restrictive covenants

Prepayment and Penalties National bond markets

Defining Elements
Rights of a Lender Markets Eurobond markets

Federal Agency Global market

Agency MBS
Govt. Sponsored Entity Bullet
Sponsored by (in the US)
Private Entity Non-agency MBS Amortizing
Principal Structure
Interest Sinking Funds

Scheduled Principal Repayment Residential Mortgage Backed Equity Linked Notes

Composed of Securities
Unscheduled Principal Fixed rate
Repayment (prepayment) Cash Flow Characteristics Floating rate notes
Weighted Average Maturity Step-up coupons
Metrics
Weighted Average Coupon Credit-linked coupons
Single Monthly Mortality (SMM) Coupon Payment Structure
Agency MBS Payment-in-kind
Conditional Prepayment Rate Prepayment
Deferred coupon
(CPR)
Asset Backed Securities
Zero coupon indexed bond
Weighted Average Life
Interest only indexed bond
Prepayment Risk Characteristics Index linked bonds
Capital indexed bond
Senior/Subordinate Tranches
Indexed annuity bonds
Reserve Fund Internal
Callable bonds
Overcollateralization Credit Enhancements Non-agency MBS
Contingency Provisions Putable bonds
3rd Party Guarantee (Insurance) External
Convertible bonds
Sequential Pay
Collateralized Mortgage Public Offering
Planned Amortisation Class and
Obligations
Support Tranche Private Placement
Floating Rate Tranches Underwriting Offering
Primary Market Issuance
No recourse provision Shelf Registration
Each commercial loan evaluated Competitive bid
individually Commercial Mortgage Backed Auctions
Securities Non-competitive bid
Senior and Subordinate
Tranches Structure Level Secondary Market Over The Counter (OTC)
Guarding against Prepayment Treasury Bills
Prepayment Lockout Risk
Prepayment Penalty Points Sovereign Govts. Treasury Notes
Loan Level
Yield Maintenance Charge Issued by Govts. Treasury Bonds

Defeasance Non-sovereign Govts.

Non-Mortgage Asset Backed Bank Loans

Securities Commercial Paper
Collateralised Debt Obligations Issued by Corporations Maturity Structure
Issuance, Trading and Funding
Default Risk Coupon Structure
Loss Severity Corporate Notes and Bonds Sinking Fund
Credit Risk
Recovery Rate Seniority Ranking
Expected Loss Contingency Provisions
Downgrade Risk Fixed Income Capital Protected Instrument
Spread Risk Yield Enhancement Instrument
Credit Related Risks
Structured Financial Instruments
Size of Float Participation Instrument
Low Liquidity Scenarios
Financial Crisis Leveraged Instrument
Seniority Ranking of Bonds Large Denomination Negotiable
Priority of Claims Certificates of Deposits

Investment Grade Wholesale fund market Central Bank Funds

Short Term Funding Available to
Non-Investment (Speculative) Categorization Banks Interbank Funds
Grade Repurchase Agreements
Credit Ratings
Cross Default Provision YTM
Notching Factors affecting Bond Price Maturity
Power of Suppliers Coupon
Power of Buyers Spot Rates
Barriers to Entry Michael Porter’s 5 Forces Flat and Full Price Accrued Interest
Substitutes Matrix Pricing
Competition Effective Annual Yield
Degree of Operating Leverage Industry Analysis
YTM
Degree of Volatility in Cash Current Yield
Flows Valuation
Capacity Simple Yield
Growth Prospects Yield Measures
Yield to Call
Profitability Measures
Yield to First Par Call
Leverage Ratios
Company Analysis Yield to Worst
Coverage Ratios
Yields, Spots and Forwards
Liquidity
G-spread
Type and Value of Intangible
Assets I-spread
Traditional Credit Analysis Credit Analysis Yield Spread Measures
Amount spent to Acquire New Collateral Static Spread
Long-Term Assets
Option Adjusted Spread
Affirmative Covenants
Covenants Change in Price
Restrictive Covenants
Sources of Return Income (Coupons)
Soundness of Strategy
Interest on Reinvested Income
Degree of Conservatism in Return
Accounting Policies Total Return ($)
Character
History of Fraud Measuring Return Holding Period Return (%)

History of Decisions Adversely Effective Annual Return

Affecting Bond Values Macaulay Duration (Mac D)
Economic Cycle Modified Duration (Mod D)
Duration
Credit Cycle Effective Duration
Stock Market Performance Key Rate Duration (KRD)
Factors Yield Spreads
Dealer Markets Risk and Return Coupon Rate
Influx of New Bond Issues Factors Affecting Interest Rate Maturity
Risk
Maturity Yield Level
Degree of Liquidity Embedded Options
Financial Projections Portfolio Duration
Debt Structure Money Duration
Corporate Structure Evaluation of High Yield Debt
Convexity
Covenant Analysis Term Structure of Yield Volatility
Equity-like Analysis for High
Yield Bonds

Political and Economic Profile

External Liquidity
Evaluation of Sovereign Debt
Fiscal Performance

Monetary Flexibility

General Obligation Bonds

Categorisation Evaluation of Municipal Debt
Revenue Bonds
 Understand the company’s
business

Identify Opportunities Uses of Industry Analysis

Portfolio Performance Attribution

Product or Service Supplied

Cyclical
Methods of Grouping of
Business Cycle Sensitivities
Defensive Companies Achieve Financial Goals
Non-cyclical
Growth Functions of the Financial Determine Equilibrium Rate of
Statistical Similarities System Return

Commercial Industry Allow Efficient Allocation of

Classification Systems (CICS) Capital

Government Industry Industry Classification Systems Fixed Income

Classification Systems (GICS) Securities Equity
Peer Group vs Industry Pooled Investments
Classification
Currencies
State of the Economy
Derivative Contracts
Demographics
Commodities
Government Influences
Macro Level
(Regulations) Real Assets

Social Trends Brokers

Technological Advancements Exchanges

Threat of Substitutes Alternative Trading Systems

(Electronic Communication
Customer Power Networks (ECNs))
Supplier Power Industry’s Competitiveness Dealers
Types of Financial
Threat of New Entrants Elements of Industry Analysis Intermediaries
Securitizers
Rivalry Depository Institutions
Embryonic Insurance Companies
Growth Arbitrageurs
Shakeout Stage in the Life Cycle Market Organisation and
Structure Settlement and Custodial
Mature Services

Decline Long
Within the Industry Positions
Cyclical Short

Leading Leverage and Margin

Lagging Initial Margin

Sensitivity to Economic Cycle Margin Call
Coincidental Maintenance Margin

Defensive Market Order

Execution Instructions
Growth Limit Order

Position on the Experience Industry and Company Analysis Day Order

Curve Fill-or-Kill (Immediate or Cancel)
Factors Affecting Return on Execution, Validity, and Clearing
Industry Concentration Good-Till-Cancelled
Invested Capital and Pricing Instructions Validity Instructions
Ease of Entry Power Good on Close

Industry Capacity Stop Loss Order

Product and Industry Life Cycle Stop ___, Limit ___ Order
Models
Clearing House Instructions
Demographics
IPOs
Governmental (Taxes, Primary
Regulations) Seasoned Equity Issue
Primary vs Secondary Markets
Social Factors Influencing Industry Secondary Call Markets
Growth
Technological Quote Driven, Order Driven, and
Brokered Markets
GDP Growth
Choosing a Target Market
Interest Rates
Macroeconomic Issues in Index Construction Choosing the Securities
Availability of Credit
Set Rebalancing Rules
Inflation
Price-Weighted Index
Operating and Investing
Activities Value-Weighted Index

Corporate Governance Equal-Weighted Index

Structure Fundamental-Weighted Index
Strengths and Weaknesses Corporate Profile Rebalancing and Reconstitution
Major Products and Services Multi-market Indices
Current Position in the Industry Sector Indices
Types of Equity Indices
Stage in the Product Life Cycle Security Market Indices Market Capitalization
Style Indices
Stage of the Industry Life Cycle Valuation
Industry’s Sensitivity to Broader Types of Issuers
Business Cycle
Type of Financing
Entry and Exit Barrier
Industry Characteristics Currency Denomination
State of Technological Types of Fixed Income Indices
Development Maturity Sectors

Regulations Credit Quality

Degree of Concentration in the Inflation Protection

Industry
Commodity Indices
Sources of Demand
Equity Alternative investment Indices Real Estate Indices
Analysis of Demand for the
Product Differentiation
Goods and Services Hedge Fund Indices
Outlook for Demand in the
Short, Mid and Long Term Market Value vs Intrinsic Value
Elements of Company Analysis Market Participants
Cost Structure of the Firms in
the Industry Factors Affecting Market Availability of Information
Efficiency
Substitute Products Limits to Trading
Outlook for Industry Capacity in Analysis of Supply
Presence of Active Investors
the Short, Mid and Long Term
Weak Form
Imports and Exports
Forms of Market Efficiency Semi-Strong Form
Entry Barriers
Strong Form
Industry Fragmentation
Analysis of Pricing Calendar Anomalies
Market Share Stability
Time Series Anomalies Momentum and Overreaction
Cost Structure of the Firm Anomalies
Activity Ratios Size Effects
Market Efficiency Cross Section Anomalies
Liquidity Ratios Valuation Effects
Analysis of the Firm’s Financial Anomalies
Solvency Ratios Ratios Closed End Investment Fund
Profitability Ratios Discounts

Financial Statistics Earnings Surprise

Other Anomalies IPOs
Cost Leadership
Competitive Strategy Employed
Differentiation Correlation between security
returns and prior information
Price vs Intrinsic Value
Loss Aversion
Present Value Models
Herding
Multiplier Models Valuation Models for Stocks
Overconfidence
Asset Based Models
Representativeness
Regular Cash Dividends Behavioural Finance vs
Traditional Finance Mental Accounting
Extra Dividends
Conservatism
Share Repurchase
Forms of Dividend Narrow Framing
Stock Dividends
Information Cascading
Stock Splits
Disposition Effect
Reverse Stock Splits
Common Shares
Declaration Date
Equity Valuation Callable Common Shares
Ex-Dividend Date Types of Equity Securities
Dividend Payment Chronology Putable Common Shares
Holder of Record Date
Preferred Shares
Payment Date
Statutory
Present Value Model Voting Rights
Cumulative
Valuing Preferred Shares
Public vs Private Equity
Gordon Growth Model (GGM) Securities
Multi-Stage Valuation Model Direct Investing
Fundamental Level I
Estimating Benchmark P/E Multiplier Models
Comparables Equity Securities American Depository Receipts Level II
Investing in Non-Domestic Depository Receipts (ADRs)
Enterprise Value (EV) Level III
Equity Securities
Asset Based Valuation Models Rule 144A

Global Registered Shares (GRs)

Basket of Listed Depository

Receipts

Role of Equity Securities

Market Value vs Book Value

Cost of Equity vs Required

Return
 Defining a Derivative

Exchange Traded vs Over-The-Counter (OTC)

Forwards

Forward Commitments Futures

Forward Commitments vs
Swaps
Contingent Claims
Options
Arbitrage Contingent Claims
Credit Derivatives
Risk Neutrality Principles of Derivatives Pricing
Long fwd and Short fwd
Replication
Spot Price
Cost of Asset Forward Contracts OTC Contract
Financing Cost
Physical Delivery
Storage Cost Factors Settlement
Cash Settlement
Income
Daily Settlement
Convenience Yield
Forward Contracts Exchange Traded
Contango and Backwardation
Initial Margin
At Inception Margin
Futures Contracts Maintenance Margin
After Inception Price and Value
Price Limits
At Expiry
Offset Trades
Correlation between Price and Interest Rate Futures Contracts
Open Interest
Forward Rate Agreements
LIBOR (FRAs) Fixed Rate or Swap Price

Basket of FRAs Floating Rate

Swaps
Swap Contracts Notional Principal
At Inception
Value Pricing and Valuation Markets and Instruments
After Inception Derivatives OTC Contract

Call Option Total Return Swap (TRS)

Put Option Protection Buyer and Protection Seller

Intrinsic Value (IV) Credit Default Swap (CDS) Periodic Premium Payments
Option Contracts Credit Derivatives
Determining Option Premium
Time Value (TV) Pre-specified Credit Event

Calls Credit Spread Options

Upper and Lower Bounds for Option Value
Puts Credit Linked Notes (CLN)

Exercise Price Right to Buy

Call Option
Interest Rates Long Call and Short Call

Volatility Factors Affecting Option Value Right to Sell

Short Option
Options
Term to Expiry Long Put and Short Put

Cash Flows on Underlying Asset Exercise (Strike) Price

Synthetic Creation of any 4th Instrument Put-Call Parity (PCP) Premium

Synthetic Creation of any 4th Instrument Put-Call-Forward Parity (PCFP) Risk Allocation

Valuing Options Using Binomial Models Price Discovery

European vs American Options Purposes of Derivative Markets Volatility Discovery

Promote Market Efficiency

Operational Efficiency

Form of Gambling

Destabilisation and Systemic

Criticisms of Derivative Markets
Risk

Complexity

Role of Arbitrage
 Aggressive Strategies

Minimal Restrictions

High Rate of Return Features

Limited Partnerships
Strategies Employed
Lock-up Periods
Degree of Active Management
Mergers
Alternative vs Traditional Specialisation
Distressed and/or Restructuring Companies Investments
Event Driven Investment Size
Activist
Tax and Legal Requirements
Special Situations
Performance Reporting
Fixed Income Convertible Arbitrage
Leveraged Buy Outs (LBOs)
Fixed Income Asset Backed Arbitrage
Angel Investing
General Fixed Income Arbitrage Relative Value
Formative Stage Financing Seed Stage
Volatility Strategies
Early Stage
Multi-Strategy Categorization Venture Capital
Later (Expansion) Stage
Macro
Mezzanine Stage
Market Neutral Hedge Funds
Development Capital (Minority Equity Investment
Fundamental Growth
Distress Investing
Fundamental Value
Equity Hedge Trade Sale
Quantitative Directional
Initial Public Offering (IPO)
Short Bias
Exit Strategies Recapitalisation
Sector Specific
Private Equity Secondary Sale
Fund of Funds (FOF)
Liquidation
Management Fee Components of Hedge Fund
Fees Fees Market (Comparable) Approach
Hurdle Rate
Conditions Incentive Fee Discounted Cash Flow
High Water Mark Valuing Portfolio Companies
Approach
Trading NAVPS Asset Based Approach
Valuation
NAVPS based on Quoted Market Prices Partnership
Structure and Fees
Investment Strategy, Process and Style Management Fee and Incentive Fee
Track Record Due Diligence on General Partner
Due Diligence
Size Energy
Key Person Risk Base Metals
Potential for Higher Long Term Rates of Return Sectors Precious Metals
Long Term in Nature Agricultural
Reasons for Investing Alternative Investments
Potential for Diversification Others
Lease/Rental Rates Adjusted for Inflation Hedge Against Inflation
Indivisibility Benefits Diversification
Unique Characteristics Return Potential
Fixed Location Physical Ownership
Unique Features
Large Investment Required Commodity Derivatives
Illiquid Exchange Traded Funds (ETFs)
Active Management Required Exposure Through Securities Issued by Companies
Commodities
Debt vs Equity Managed Futures Funds
Forms of Real Estate
Public vs Private Individually Managed Accounts
Direct Ownership Speciality Mutual Funds
Leveraged Ownership Performance
Mortgage Loans Main Types of Investment Spot Price
Real Estate Limited Partnerships (RELPs) Interest
Pricing
Real Estate Investment Trusts (REITs) Pooled Vehicles Storage Cost
Securitised Securities Convenience Yield
Residential Property Real Estate Collateral Yield
Commercial Real Estate Sources of Return Spot Price Return
REITs Sectors Roll Yield
Mortgage Backed Securities (MBS) Economic
Categories
Timberland and Farmland Social
Appraisals Brownfield
Stage of Development
Transactions Measuring Performance Greenfield
REITs Direct Investment
Invest Through
Comparable Sales Indirect Investment Master Limited Partnership (MLP)
Direct Capitalisation Infrastructure Stable Income
Income Approach Real Estate Valuation
Discounted Cash Flow Diversification
Characteristics
Cost Approach Inflation Protection
Funds From Operations (FFO) Better Asset Liability Management for Long Term Investors
Income Based
Adjusted Funds From Operations (AFFO) Deviation from Original Revenue Expectations
REIT Valuation
Asset Based Operational and Construction Costs
Risks
Fluctuation with Economic Conditions Financed with Debt - Financial Risk
Operational Efficiency Regulatory Restraints on Prices
Risks
Leverage

Delay in Long Term Projects

 Planning

Determine Current Level of Risk Top-Down Approach

Asset Allocation
Exposure Bottom-Up Approach
Broad Steps of Risk Process
Determine Target Level of Risk Execution
Management Security Selection
Exposure
Portfolio Construction
Mitigation of Risk
Feedback
Risk Governance
Individuals
Risk Identification and
Measurement Defined Benefit Pensions

Risk Infrastructure Endowments and Foundations

Features of Risk Management
Policies and Procedures Framework Banks
Types of Clients
Risk Mitigation Insurance Companies

Communication Investment Companies (Mutual

Funds)
Strategic Analysis and
Integration Sovereign Wealth Funds (SWF)

Risk Governance Defined Contribution Plans

Pension Plans
Risk Tolerance Defined Benefit Plans

Risk Budgeting Active vs Passive

Market Risk Traditional vs Alternative

Credit Risk Financial Risks Overview Aspects of Asset Management Ownership Structure

Liquidity Risk Growth of Passive Investing

Settlement Risk Industry Trends Use of Big Data

Sources of Risk
Legal Risk Robo-Advisors

Compliance Risk Net Asset Value per Share

Non-Financial Risks Risk Management
(NAVPS)
Model Risk
Open Ended Structure
Operation Risk
Closed Ended Structure
Solvency Risk Mutual Funds
Money Market Funds
Probabilities
Bond Mutual Funds
Standard Deviation
Categorization Stock Mutual Funds
Delta
Hybrid or Balanced Mutual
Gamma Funds
Options
Vega Exchange Traded Funds (ETFs)
Rho Separately Managed Accounts
Duration (SMA) or Wrap Accounts
Bonds Measuring Risk Exposures
Convexity Market Neutral
Pooled Investments
Value at Risk (VaR) Long-Short

Scenario Analysis Dedicated Short Bias

Stress Testing Event Driven

Hedge Funds Strategies
Credit Risk Measures Convertible Arbitrage

Credit Default Swap (CDS) Global Macro

Spreads Emerging Markets
Risk Prevention and Avoidance Fixed Income Arbitrage
Risk Acceptance Buyout and Venture Capital
Modifying Risk Exposures
Risk Transfer (Insurance Funds

Risk Shifting Holding Period Return

Principles Annual Arithmetic Average

Measures of Return Return
Line Chart
Annual Geometric Average
Bar Chart Return

Candlestick Chart Gross vs Net Return

Point and Figure Chart Real vs Nominal Return

Charts
Scales Unlevered Return (ROA)

Volume Leveraged Return Levered Return (ROE)

Time Intervals Margin (Equity)

Relative Strength Money Weighted vs Time

Weighted Return
Uptrend
Trend Lines Distribution of Returns
Downtrend
Skewness
Support and Resistance Levels
Asset Characteristics Excess Kurtosis
Head and Shoulders
Commissions
Inverse Head and Shoulders
Operational Efficiency Bid-Ask Spreads
Double Tops
Reversal Patterns Market Impact
Double Bottoms
Mean, Variance, and Covariance
Triple Tops of Asset Returns Correlation
Triple Bottoms Risk Aversion
Chart Patterns
Ascending Effect of Correlation on Portfolio
Descending Triangles Risk

Symmetrical Minimum Variance and Efficient Minimum Variance Frontier

Continuation Patterns Frontier
Rectangles Risk and Return Efficient Frontier

Flags and Pennants Portfolio Management Capital Allocation Line (CAL) Optimal Risky Portfolio
Technical Analysis
Moving Average Indifference Curve
Price Based Indicators
Bollinger Band Optimal Portfolio Mix Capital Allocation Line (CAL)

Momentum or Rate of Change Sharpe Ratio (Slope of CAL)

(ROC) Oscillator
Capital Market Line (CML) Market Sharpe Ratio
Relative Strength Index (RSI)
Portfolio Implications of
Stochastic Oscillator Momentum Oscillators Borrowing vs Lending

Moving Average Convergence/ Systematic vs Unsystematic

Divergence Oscillator Risks

Opinion Polls Fundamental Models

Put/Call Ratio Return Generating Models Statistical Models

Volatility Index Sentiment Indicators The Market Model

Margin Debt Beta

Short Interest Ratio Investors are Risk Averse,

Utility-Maximising and Rational
Arms Index
Markets are Frictionless
Margin Debt
Investors have Homogenous
Mutual Funds Cash Positions Flow of Funds Indicators
Expectations
Initial or Secondary Public Assumptions Investors have Same Single
Offerings Period Investment Horizon
Kondratieff Wave All Investments are Infinitely
Divisible
18 Year Cycle
Cycles Capital Asset Pricing Model
Investors are Price Takers
Decennial Pattern (CAPM)
Sharpe Ratio
Presidential Cycle
Treynor Ratio
Elliot Wave Theory Performance Evaluation
M²
Intermarket Analysis
Applications Jensen’s Alpha
Analysis of Large Data Sets
Identifying Mispriced Securities
Analytical Tools - AI Systems Security Selection
Relative Valuations
Automated Trading
Description Introduction
Automated (Robo) Advisors
Statement of Purpose
Financial Record Keeping -
Distributed Ledger Technology Duties and Responsibilities
(DLT)
Procedures to Keep the IPS
Financial Markets Investment Policy Statement Current
Corporations (IPS)
Investment Objectives
Govt Agencies Investment Constraints
Sources
Individuals Investment Guidelines
Sensors Evaluation and Review
Internet of Things Appendices
Structured Absolute Terms
Unstructured Forms Relative Terms
Risk and Return Objectives
Semi-structured Big Data Nominal vs Real; Before Tax vs After Tax;
Before Fees vs After Fees
Volume
Investment Horizon
Velocity Characteristics
Income
Veracity Analysing an Investor’s Risk
Tolerance Wealth
Ethics
Fintech Stability of Income
Data Quality
Challenges Financial Dependents
Data Quantity
Liquidity
Data Transformation
Time Horizon
Supervised Learning
Machine Learning Approaches Portfolio Planning and
Construction Investment Constraints Tax Concerns
Unsupervised Learning
Artificial Intelligence and Legal and Regulatory
Capture Machine Learning
Unique Needs and Preferences
Curation
Machine Learning Date
Specification of Asset Classes
Storage Processing Steps
Client’s Objectives and
Search
Constraints
Transfer Strategic Asset Allocation (SAA) Manager’s Own Capital Market
Text Analytics Expectations

Robo-Advisory Services Fintech Applications to Strategic Asset Allocation

Investment Management Principles of Portfolio
Risk Analysis Construction Risk Budgeting Tactical Asset Allocation

Algorithmic Trading Security Selection

Cryptocurrencies Rebalancing

Tokenization Use of Multiple Managers Core-Satellite Approach

Distributed Ledger Technology
Post Trade Clearing and (DLT) Issuers do not usually Disclose
Settlement ESG Info

Compliance ESG Screens Result in a More

Limited Investment Universe

Requires Benchmark with

Similar Limitations to Enable
Impact of ESG Considerations
Comparison

Requires Specialised
Knowledge

Firms will be More Accountable

and Improve their Performance
 Cash on Hand

Short Term Investments Primary

Lines of Credit
Sources of Liquidity
Renegotiation of Debt Terms

Liquidate some Assets Secondary Shareholder Theory

Corporate Governance Theories
File for Bankruptcy Protection Stakeholder Theory
Overdue Receivables Shareholders
Obsolete Inventory Drags (delay of receipts) Creditors
Tighter Credit Factors Influencing Company’s Senior Managers
Liquidity
Payments to Vendors before Employees
due dates Company Shareholders
Pulls (premature disbursements) Board of Directors
Preserving Lines of Credit
Customers
Liquidity Ratio
Suppliers
Quick Ratio
Governments and Regulators
Receivables Turnover Liquidity Measures
Shareholders vs Managers
Inventory Turnover
Controlling vs Minority
Payables Turnover Shareholders
Net Operating Cycle or Cash Board vs Managers
Principal-Agent Relationship
Conversion Cycle (CCC) Operating Cycle
Conflicts
Shareholders vs Creditors
Variability of Cash Inflows and
Outflows Customers vs Shareholders
Factors for Liquidity Buffer to be
Degree of Flexibility Desired Customers vs Suppliers
Maintained
Ability to Access Other Sources Shareholders vs Government
of Capital
Annual General Meeting (AGM)
Receipts from Operations
Proxy Voting
Funds Received from
Subsidiaries and Affiliates Straight vs Cumulative Voting

Proceeds of Maturing Extraordinary Meetings

Investments Cash Inflow Elements
Managing Net Daily Cash Board of Directors
Proceeds from Issuance of Debt Position Stakeholder Management Audit
Investment Income Reporting and Transparency
Tax Refunds Remuneration Policies
Disbursement for Operating Creditor Relations
Activities
Employee Relations
Funds Forwarded to
Subsidiaries and Affiliates Customers and Suppliers

New Investments Cash Outflow Elements One Tier System

Board Composition
Debt Repayment Two Tier System

Dividend and Interest Payments Functions and Responsibilities

Tax Payments Corporate Governance and The Board of Directors Audit Committee
ESG
Active Governance Committee
Types
Passive Remuneration Committee
Working Capital Management Board Committees
Purpose of Portfolio Nominations Committee

Authorization Risk Committee

Parameters
Limitations and Restrictions Investment Committee
Short Term Investment Policies
Quality Shareholder Engagement

Bank Discount Yield Shareholder Activism

Market Factors
Money Market Yield Issued at Discount Competition and Takeover
Factors Affecting Stakeholder Potential
Bond Equivalent Yield Classification Relationships
Legal Environment
Issued at Par
Non-Market Factors Media
Days in Receivables (Days
Sales Outstanding) Accounts Receivable Corporate Governance Industry

Weighted Average Collection Performance Weak Control Systems

Period
Risks of Poor Corporate Ineffective Decision Making
Requirements for Typical Governance
Production Run or Operating Legal, Regulatory, and
Cycle Reputational Risk

Precaution Against Certain Default Risk

Factors Affecting Ideal Inventory
Events Level Alignment of Interests
Variability of Demand Operational Efficiency
Speculation Benefits of Effective Corporate
Improved Capital
Governance
Safety Stock Level Improved Operating and
Inventory Management
Lead Time Economic Order Quantity (EOQ) Financial Performance
Performance
Monitoring and Maintaining
Demand Inventory Levels Low Default Risk

Just-In-Time (JIT) Economic Ownership and Voting

Control
Inventory Turnover
Board Composition
Days in Inventory
Analysis of Corporate Remuneration and Corporate
Equivalent Annual Return (Cost Governance Performance
of Trade Credit)
Investors in the Company
Disbursement Float
Accounts Payable Performance Corporate Finance Shareholder Rights
Payables Turnover
Managing Long Term Risks
Days in Payables
Negative (Exclusionary)
Evaluating Trade Discounts Screening

Uncommitted Lines of Credit Environmental, Social, and Positive Screening

(LOC) Governance (ESG) Implementing ESG
Considerations Considerations Best in Class
Committed (Regular) LOC Banks
Thematic Investing
Revolving Credit Agreements Short Term Funding Alternatives
Impact Investing
Commercial Paper Money Market
Weighted Average Cost of
Issuer Size Capital (WACC)

Maintaining Flexibility Factors Target Capital Structure

Choosing a Short Term
Cash Flow Management Financing Method Investment Opportunity Set
(IOS)
Effective Periodic Funding Cost Optimal Capital Budget
Marginal Cost of Capital (MCC)
Generation of Business Ideas
CAPM
Analysis of Project
Discount Dividend Model (DDM)
Evaluation of Fit in the Process Cost of Capital Cost of Common Equity
Company’s Overall Strategy Bond Yield Plus Risk Premium
(BYPRP)
Monitor and Conduct a Post
Audit Project Beta

Replacement Country Risk Premium

Expansion MCC Schedule and Break

Points
New Product
Categories of Capital Projects
Floatation Costs
Regulatory, Safety and
Environmental Leverage

Other Sales Risk

Net Present Value Defining Risks Operating Risk

Discount Rate Business Risk

Capital Budgeting
Sunk Costs Financial Risk
Principles of Capital Budgeting
Opportunity Costs Degree of Operating Leverage
Leverage
Conventional vs Non- Degrees of Leverage Degree of Financial Leverage
conventional Cash Flows
Degree of Total Leverage
Capital Rationing
Project Interactions Break Even Point
Project Sequencing Break Even Quantities of Sales
Operating Break Even Point
NPV, IRR and Profitability Index

Payback and Discounted

Payback Periods]

Independent vs Mutually
Exclusive Projects

NPV Relation to Stock Price