Unit I: The Role of Financial Institutions and Markets 4 hours
Meaning of financial markets and institutions; functions of the financial markets;
classification and diversity of financial markets; types of financial institutions and their
functions; classification of financial institutions in Nepal.
Unit II: Central Banking 4 hours
Meaning and functions of central bank; monetary policy tools of the central bank; effects of
Monetary tools on various economic variables; Nepal Rastra Bank and monetary policy tools
Unit III: Determination and Structure of Interest Rates 5 hours
Determination of interest rates: loanable fund theory; economic forces affecting interest rates; forecasting interest rates. Structure of interest rates: characteristics of debt securities and yield variation; explaining actual yield differentials; theories of term structure of interest rates; uses of the term structure.
Unit IV: The Money Market 5 hours
Introduction of money market; yields on money market securities; money market securities;
money market participants; international money market; risk of money market securities.
Unit V: The Bond and Stock Market 10 hours
Bond markets: bond market securities – Treasury notes and bonds, strips; municipal bonds –
types and trading process; corporate bonds – bond characteristics, bond ratings, bond market
index, comparison of bond market securities; international bond market securities – euro
bonds, foreign bonds, Brady bonds and sovereign bonds. Stock market: stock market
securities – common stock and preferred stocks; primary and secondary stock markets; stock
market indexes; regulations of stock market and the role of Nepal Securities Board;
international stock market.
Unit VI: Commercial Banks 10 hours
Services provided by commercial banks; size, structure, and composition of the industry;
technology in commercial banking; sources and uses of funds of commercial banks; off-balance
sheet activities; regulatory structure of banks; regulation of bank deposit, operation
and capital; risk in commercial banks – credit risk, liquidity risk, interest rate risk, market
risk, off-balance sheet risk, foreign exchange risk, country risk, technology and operational
risk, insolvency risk.
Unit VII: Other Financial Institutions 10 hours
Insurance companies: life insurance companies – size, structure and composition of the
industry; property-casualty insurance companies – size, structure and composition of the
industry; regulation of insurance companies. Mutual fund: size, structure and composition of
the industry; different types of mutual fund; mutual fund prospectus and objectives; net assets
value; mutual fund costs. Pension fund: insured versus noninsured funds, defined benefit
versus defined contribution pension funds, private pension funds versus public pension funds.
Security firms and investment banks: services offered by securities firms versus investment
banks. Other lending and saving institutions: meaning and functions of saving associations,
saving banks, credit unions, finance companies.