Advanced Investment Appraisal & Real Options
4 articles RO1 Using Real Options When Making Financial Strategy Decisions Considers how a traditional project can be reassessed using option valuation and how it assists when evaluating a portfolio of inter-dependent projects. ↗ RO2 Investment Appraisal and Real Options Covers real options calculations through three worked examples, then considers limitations of applying real options in practice and how they can be mitigated. ↗ IP1 International Project Appraisal — Part 1 Suggests a methodical approach to any international project appraisal exam question — Part 1 focuses on a Section B 25-mark question approach. ↗ IP2 International Project Appraisal — Part 2 Follows Part 1 — showing how to methodically approach an international project appraisal question in Section A, worth 50 marks. ↗
Treasury & Interest Rate Risk Management
4 articles IRR How to Answer an Interest Rate Risk Management Question Explains the significance of the information given in interest rate risk management questions and demonstrates exactly what is required to score marks. ↗ BR Basis Risk Examines basis risk — which arises when the price of a futures contract does not have a predictable relationship with the spot price of the instrument being hedged. ↗ SW Determining Interest Rate Forwards and Swap Valuation Shows how interest rate forwards are determined from the spot yield curve and how they are used in determining the value of an interest rate swap. ↗ BND Bond Valuation and Bond Yields Considers how bonds are valued and the relationship between bond value, yield to maturity, and the spot yield curve — the first of two related articles. ↗
Foreign Currency Risk Management
3 articles FXD Exchange Traded Foreign Exchange Derivatives Covers foreign exchange futures and options using real market data, focusing on key areas of significant importance for AFM exam candidates. ↗ CS Currency Swaps Explains currency swaps — agreements in which two parties exchange principal and interest in one currency for principal and interest in another. ↗ CP Conditional Probability Looks at decision making under uncertainty — how to consider all possible outcomes and associated probabilities when evaluating financial and strategic decisions. ↗
Business Valuations & Mergers and Acquisitions
3 articles VAL Business Valuations Demonstrates how to tackle a business valuation question in AFM — covering assets-based, income-based, and cash flow-based approaches with practical application. ↗ RT Reverse Takeovers Explains reverse takeovers — now examinable in AFM — including the mechanics, potential benefits, and drawbacks associated with this form of acquisition. ↗ RM Risk Management Explores the circumstances where managing risk may increase the value of a corporation — moving beyond the mechanics to understanding the strategic rationale. ↗
Islamic Finance
2 articles IS1 Aspects of Islamic Finance Provides a general overview of the different aspects, issues, and developments of Islamic finance — extending the explanations given in the sukuk bonds article. ↗ IS2 Islamic Finance — Theory and Practical Use of Sukuk Bonds Covers Islamic finance as a growing source of finance — including the theory, practical use, and the success and failure of sukuk bonds in real markets. ↗
Emerging Issues & Behavioural Finance
2 articles BEH Patterns of Behaviour — Behavioural Finance Explores how behavioural factors influence financial decision making and, consequently, how stock markets and companies' financial strategies may behave unpredictably. ↗ SEC Securitisation and Tranching Covers securitisation — a topical issue since the credit crunch and still a relevant area for AFM students on structured finance and financial instruments. ↗
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