FMP 1. Banks: LOs

a) Identify the major risks faced by banks and explain ways in which these risks can arise.

b) Distinguish between economic capital and regulatory capital.

c) Summarize the Basel Committee regulations for regulatory capital and their motivations.

d) Explain how deposit insurance gives rise to a moral hazard problem.

e) Describe investment banking financing arrangements including private placement, public offering, best efforts, firm commitment, and Dutch auction approaches.

f) Describe the potential conflicts of interest among commercial banking, securities services, and investment banking divisions of a bank, and recommend solutions to these conflict of interest problems.

g) Describe the distinctions between the banking book and the trading book of a bank.

h) Explain the originate-to-distribute banking model and discuss its benefits and drawbacks.

FMP 2. Insurance Companies and Pension Plans: LOs

a) Describe the key features of the various categories of insurance companies and identify the risks facing insurance companies.

b) Describe the use of mortality tables and calculate the premium payment for a policy holder.

c) Distinguish between mortality risk and longevity risk and describe how to hedge these risks.

d) Describe defined benefit plans and defined contribution plans and explain the differences between them.

e) Compare the various types of life insurance policies

f) Calculate and interpret loss ratio, expense ratio, combined ratio, and operating ratio for a property-casualty insurance company.

g) Describe moral hazard and adverse selection risks facing insurance companies, provide examples of each, and describe how to overcome these problems.

h) Evaluate the capital requirements for life insurance and property-casualty insurance companies.

i) Compare the guaranty system and the regulatory requirements for insurance companies with those for banks.

FMP 3. Fund Management: LOs

a) Differentiate among open-end mutual funds, closed-end mutual funds, and exchange-traded funds (ETFs).

b) Identify and describe potential undesirable trading behaviors at mutual funds.

c) Calculate the net asset value (NAV) of an open-end mutual fund.

d) Explain the key differences between hedge funds and mutual funds.

e) Calculate the return on a hedge fund investment and explain the incentive fee structure of a hedge fund, including the terms hurdle rate, high-water mark, and clawback.

f) Describe various hedge fund strategies including long/short equity, dedicated short, distressed securities, merger arbitrage, convertible arbitrage, fixed income arbitrage, emerging markets, global macro, and managed futures, and identify the risks faced by hedge funds.

g) Describe characteristics of mutual fund and hedge fund performance and explain the effect of measurement biases on performance measurement.