Brickwork Finance Academy
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Certificate
BFA Level I &
Level II exams

BFA Level I & II

Admission Open Class of 2020 - Begins 15 June 2019

Course Curriculum

Study Materials

We believe that candidate should be exposed to the best books in the industry rather than brief study material that attempts to compress many concepts in few pages. Candidates might end up cramming rather than read and understand full concepts. Hence, Brickwork Finance Academy does not prepare any study material for the exam but prescribes few excellent books for study. The faculty of Brickwork chooses the best and most readable books and they are often used by major business schools like Harvard and Wharton professors. In addition, certain books written by Indian professors are also prescribed to cover the relevant Indian stock, bond and credit markets. Brickwork chooses books that are both academically rigorous and are enjoyable practical readings.

BFA Curriculum:

Please note that the curriculum is same for Level I and Level II exams. The Level I exam is multiple choice and Level II is essay type. Candidates find Level II is tougher than Level I.

Basics of Financial Analysis

101 – Managerial Economics
  1. Introduction and Basic Concepts: Key Principles of Economics, Demand , Supply and Market Equilibrium, Measuring GDP, GNP, Unemployment and Inflation
  2. Economic Cycles and Fiscal Policy: Aggregate Demand and Aggregate Supply, Fiscal Policy, Income-Expenditure Models, Investment and Financial Markets
  3. Money, Banking and Monetary Policy: Money and the Banking System, Central Banks and Monetary Policy
  4. Demand and Supply Analysis: Elasticity, Consumer Choice: Indifference Curves, Utility Theory, Government intervention and Market Efficiency, Total Cost Fixed Cost and Variable Cost, Breakeven Analysis, Short term and Long term Profit Maximization
  5. Market Structure and Pricing: Perfect Competition, Monopoly, Oligopoly, Regulations to enhance competition

Books*
A guide to Econometrics by Peter Kennedy

102 - Accounting and Financial Reporting
  1. Fundamentals and Analysis of Financial Statements: demonstrate the use of a framework for the Analysis of Financial Statements given a particular problem, question, or purpose, identify Financial Reporting choices and biases that affect the Quality and Comparability of Companies’ financial statements and illustrate how such biases affect financial decisions
  2. Ratio Analysis : evaluate the quality of a company’s financial data and recommend appropriate adjustments to improve quality and comparability with similar Companies.
  3. Indian Accounting Standards, IFRS and US GAAP: analyze and interpret the effects of balance sheet modifications, earnings normalization, and cash-flow-statement-related modifications on a company’s financial statements, financial ratios, and overall financial condition
  4. Window Dressing Techniques: predict the impact of differences in accounting rules, methods, and assumptions on financial statements and ratios. Study of accounting scams

Books*
Accounting: Text and Cases by Robert Anthony, David Hawkins, Kenneth Merchant

103 – Corporate Finance
  1. Net Present Value: Concept of Simple Interest and Compound Interest, Concept of Future Value and Present Value, Annuity due and Regular Annuity, Amortisation of Loans.
  2. Cost of Capital: Cost of Debt – for Term Loans and Bonds, Cost of Equity – DDM, CAPM, Cost of Preference Shares, Calculation of Weights- Market Value Vs. Book Value, WACC, Floatation Costs
  3. Capital Budgeting: Payback Period, Discounted Payback, NPV, IRR, Profitability Index
  4. Capital Structure and the MM Hypothesis: Traditional Views, MM Proposition I & II with taxes and without taxes, Cost of Financial Distress, Agency Costs, Pecking Order
  5. Dividend Policy: Theories of Investor Preference, Residual Model, Stock Repurchases, Stock Dividends and Stock Splits.

Books*
Financial Management: Theory and Practice
Principles of Corporate Finance by Richard Brealey, Stewart Myers, Franklin Allen, Pitabas Mohanty

104 - US and Indian Financial Markets
  1. Theory of Asymmetric Information
  2. The organization of Financial Markets, Safety & Regulation - Managing Liquidity & Risk, Security Market Regulation & Stability
  3. Insurance, Pension Plans & Mutual Funds
  4. The Mortgage Market and the International Financial Crisis,
  5. Debt Markets, The Equity Market
  6. The Banking Industry – Fractional Reserve to Universal Banking
  7. Analysis of Banks – Liquidity, Capital Adequacy, Profitability Ratios
  8. Bank Safety Regulation – Prudential Regulation, Liquidity Crisis, Private solutions for Liquidity Crisis, Lender of Last resort, Government Guarantees of Banks, Reducing the Cost of Moral Hazard, consequences of Tighter Regulation, Introduction to Basel Standards

Books*
Financial Institutions and Markets by Meir Kohn,

Investment Management

201- Investment Environment
  1. Investment Environment: Real Assets vs Financial Assets, Financial Markets & the Economy, Clients of the Financial System, The Environment response to Clientele Demands, Markets & Market Structure, Ongoing Trends
  2. Financial Instruments:The Money Market, Bond Market, Equity Securities, Stock & Bond Market Indexes, Derivative Markets
  3. Trading of Securities: Issuances, Exchanges, Market Structure, Trading Costs, Buying on Margin, Short Sales, Regulation of Securities Markets
  4. Mutual Funds & Other Investment Companies
  5. Pension Funds, Insurance Companies, NBFCs
  6. History of Interest Rates

Books*
Investments by Zvi Bodie, Alex Kane, Alan J Marcus, Pitabas Mohanty

202 - Fixed Income Securities
  1. Bond Prices & Yields: Bond Characteristics, Bond Pricing, Bond Yields, Bond Prices over time, Default Risk & Bond Pricing
  2. The Term Structure Interest Rates: The Term Structure under certainty, Interest Rate Uncertainty & Forward Rates, Theories of Term Structure, Interpreting the Term Structure, Forward Rates as Forward Contracts, Measuring the Term Structure
  3. Managing Bond Portfolios: Interest Rate Risk, Convexity, Passive Bond Management, Active Bond Management, Interest Rate Swaps, Financial Engineering & Interest Rate Derivatives

Books*
Investments by Zvi Bodie, Alex Kane, Alan J Marcus, Pitabas Mohanty
Bond Analysis, Markets & Strategies by Frank J Fabozzi

203 - Security Analysis and Portfolio Management
  1. Risk & Return: Defining Risk and Return, Concept of Ex-post and Ex- ante returns, Covariance, Standard Deviation, CAPM, Concept of Beta, Concept of Mis-Pricing
  2. Fundamental Analysis: The EIC framework
  3. Technical Analysis: Types of Charts, The Dow Theory, Fibonacci Retracement Levels
  4. Efficient Markets Hypothesis, Behavioral Theory Implications
  5. Process of Portfolio Management: Investment Decisions, Constraints, Asset Allocation, Managing Portfolios of Individual Investors, Pension Funds, Future trends in Portfolio Management
  6. Portfolio Selection: Modern Portfolio Theory, Separation Theorem, Efficiency Frontier, CML and SML
  7. Theory of Active Portfolio Management/Market
  8. Portfolio Evaluation and Revision: Sharpe Ratio, Treynor Ratio and Jensons’ Alpha

Books*
Investments by Zvi Bodie, Alex Kane, Alan J Marcus, Pitabas Mohanty
Security Analysis: Sixth Edition, Foreword by Warren Buffett
Damodaran on Valuation by Aswath Damodaran

204 - Derivatives
  1. Options Markets: The option contract, values of options at expiration, Option Strategies, The Put-Call Parity Relationship, Option like Securities, Financial Engineering, Exotic Options
  2. Options Valuation: Restrictions on Option Values, Binomial Option Pricing, Black Scholes Option Valuation, Using Black Scholes Formula, Empirical Evidence on Option pricing
  3. Future Markets: The futures Contract, Mechanics of Trading in Futures Markets, Futures Markets Strategies, The determination of Futures Prices, Futures Prices Vs. Expected Spot Prices
  4. Futures & Swaps: Foreign Exchange Futures, Stock Index Futures, Interest Rates Futures, Commodity Futures Pricing, Swaps

Books*
Investments by Zvi Bodie, Alex Kane, Alan J Marcus, Pitabas Mohanty
Options, Futures & Other Derivatives by John Hull, Sankarshan Basu

Credit Management

301 - Commercial Banking
  1. Issues in Bank Management: Role of Commercial Banks in the Economy, Structure & Regulation of the Commercial Banking Industry
  2. Banking Trends & Competition, Analyzing Bank Performance
  3. Asset Liability Management: Focus of Asset Liability Management, Defensive & Aggressive Management, Gap Analysis, Duration Gap Analysis, Interest Rate Risk Management using Futures & Swaps
  4. Liquidity Planning: Liquidity of Individual Banks, Sources of Liquidity, Trends in Liquidity Management, Estimating Liquidity Needs, Sources & Uses of Funds, Structure of Deposits Method, Forecasting Methods, Liquidity Management Policies
  5. Investment Portfolio: Nature of Investment Portfolio, Return & Risk in the Management of Investment Portfolio, Investment Portfolio Policies, Arbitrage & Tax Swapping, Credit Portfolio

Books*
Bank Management by Timothy W. Koch

302 – Credit Management in Banks and NBFC
  1. Understanding the Credit Environment
  2. Understand the Credit Policy and Develop the Credit Strategies
  3. Develop Credit Appraisal Process: Standardization of Loan Documents, Monitoring Mechanism and Dynamic Credit Management
  4. Working Capital, Term Loans, Real Estate Loans, SME Loans Housing Loans, Car Loans, Gold Loans, Priority Sector Lending, Agriculture Loans, Student Loans, Export Import Finance

The above course will be based on Brickwork Ratings methodology, criteria and risk assessment models. Relevant readings will be circulated in the class.

303 – Credit Rating Agencies
  1. Ratings Criteria for Large Corporates, Finance Sector, Infrastructure Sector, Commercial Paper, SMEs, Government Grants – State & Central Government
  2. Probability of Default Statistics
  3. Credit Rating Parameters & Templates for Business Risk, Industry Risk, Financial Risk & Management Risk
  4. Credit Rating Models/Discriminant Anal
  5. Credit Scoring Models
  6. Sovereign Ratings – Public Finance, State – Centre, Federal Structure, Municipal Finances
304 – Project Assignment

The above course will be based on Brickwork Ratings methodology, criteria and risk assessment models. Relevant readings will be circulated in the class.
Country Risk Analysis – A handbook, Ronald. L. Solberg
Credit Rating Agencies and Their Potential Impact on Developing Countries, Marwan Elkhoury
Discussion Paper – United Nations Conference on Trade and Development.

305 – Public Finance
  1. Description of Indian and internarial financial institutions
  2. Functions of Government and Monetary Authority
  3. Inflation and Value of Money,
  4. Pension funds and retirement planning
  5. Government finances – Budgets – Gross Fiscal Deficit
  6. Sovereign Ratings – Public Finance, State – Centre, Federal Structure, Municipal Finances
  7. Fiscal federalism in India and US

Books*
Financial Institutions and Markets by Meir Kohn,
Financial Institutions and Markets by L M Bhole

Risk Management

401 - Overview of Risk Management & General Techniques in Risk Management
  1. High level view of Risk Management & general techniques in Risk Management:
  2. Concept of Risk, Types of Risk, Risk Management Techniques - Strategies, Processes and Measure, Manage & Monitor
  3. Instruments of Risk Management
  4. Trends in Risk Management
  5. Role of Risk Manager and Required Skill Sets
402- Risk Management in Banks
  1. Overview of Basel II
  2. Credit Risk Management
  3. Market Risk Management - Liquidity and Interest Rate Risk, ALM
  4. Contingent Liabilities, Measuring Current Exposure of Derivative Products – Forwards, Futures, Swaps, etc.
  5. Operational Risk Management
  6. Basel II & III
  7. Best practices in Bank Risk Management approaches

Books*
Basel Accord handbooks and documents

403 - Risk Management in Mutual Funds
  1. How to analyze Mutual Fund performance?
  2. Measures of Risk & Return, Evaluating Market Timing, Asset Allocation, Security Selection abilities
  3. Active & Passive Portfolio Management Techniques for Liquid, Income, Debt, Balanced & Equity Funds
  4. Risk Management in Hedge Funds & Private Equity
  5. Types of Risks: Business Continuity, Compliance & Regulatory Risk, Investment Risk & Organizational Role
  6. Mutual Fund Evaluation Agencies

Books*
SEBI regulations and code of conduct
AMFI regulations and code of conduct

404- Risk Management in Insurance Companies
  1. Types of Risk in Insurance Business : Types of Policies sold, Recent growth of the Life Insurance Industry, Funds raised by Life Insurance Companies, Policy Holders Premiums & Investment Income, Separate Accounts & Guaranteed Investment Contracts
  2. Property Casualty Insurance Companies: Problems faced in recent years, Risk Protection services sold by Property-Casualty Insurers, Investment Portfolios, Industry Earnings & Losses, Variety of Organizational Forms
  3. Distribution of Assets in Life Insurance Industry: Liquid Assets, Corporate Stock, Corporate Debt Securities, Commercial, Residential & Farm Mortgages, Direct Real Estate Investments, Loans, Advances to Policy Holders
  4. Pension Funds: Functions, Evaluation of Pension Funds, characteristics of Pension Funds, Factors that influence Pension Fund Investment Policies, Pension Fund Investments, Investment performance of Pension Funds, Future Trends
  5. Solvency II framework: Implication, Solvency modernization initiative

Books*
IRDA annual reports, rules and regulations

405. Corporate Risk Management
  1. Enterprise Wide Risk Management (EWRM) Techniques
  2. Uncertain Interest Rate, Exchange Rate, Macro Environment
  3. Foreign Exchange Risk Management: Measuring Translation (Accounting) Exposure, Managing Transaction Exposure
  4. Measuring Economic Exposure, Managing Economic Exposure
  5. Commodity Risk Management
  6. Exotic Derivatives – lessons learnt, solutions

Books*
Multinational Financial Management by Alan C. Shapiro



Details of Books Recommended

The books are categorized into Must read, Recommended and Good to Have category.

Must Have: Basics of Investment, Credit and Risk Management (mandatory)
  1. Accounting: Text and Cases by Robert Anthony, David Hawkins, Kenneth Merchant
  2. Investments by Zvi Bodie, Alex Kane, Alan J Marcus, Pitabas Mohanty
  3. Principles of Corporate Finance by Richard Brealey, Stewart Myers, Franklin Allen, Pitabas Mohanty
  4. Options, Futures & Other Derivatives by John Hull and Sankarshan Basu
  5. Economics by Paul A. Samuelson, William D. Nordhaus
  6. Bank Credit Management by S. Murali, K.R. Subbakrishna
  7. Financial Institutions and Markets by L M Bhole
Recommended –Advanced Concepts in Investment, Credit and Risk Management
  1. Bond Analysis, Markets & Strategies by Frank J Fabozzi
  2. Security Analysis: Sixth Edition, Foreword by Warren Buffett
  3. Damodaran on Valuation by Aswath Damodaran
  4. Bank Management by Timothy W. Koch
  5. Basel Accord handbooks and documents
  6. SEBI regulations and code of conduct
  7. AMFI regulations and code of conduct
  8. IRDA annual reports, rules and regulations
Good to Have Books
  1. The Concepts & Practice of Mathematical Finance by Mark Joshi
  2. A guide to Econometrics by Peter Kennedy
  3. Financial Modeling using Excel and VBA by Chandan Sengupta
  4. Financial Institutions & Markets by Meir Kohn
  5. Financial Management by Prasanna Chandra
  6. Multinational Financial Management by Alan C. Shapiro

Note: Candidates who register for the Banking and Financial Analyst exam will be sent a detailed note with regards to exam preparation with reference to mandatory books