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Fixed Income Security

Fixed income securities are investment instruments that provide investors with a fixed rate of return over a specific period. They are issued by governments, corporations, and other entities to raise capital, and they typically pay interest or dividends to the investor on a regular basis. Here are some common types of fixed income securities: Bonds: A bond is a debt security that represents a loan from the investor to the issuer. Bonds are...

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Important clearing houses

Trade clearing houses are entities that act as intermediaries between buyers and sellers in financial transactions, helping to facilitate the settlement process. Here are some examples of trade clearing houses across the globe: Depository Trust Company (DTC): DTC is the main clearinghouse for securities in the United States, providing settlement services for equities, corporate bonds, municipal bonds, and other securities. Clearstream: Clearstream is a clearinghouse based in Luxembourg that offers settlement and custody...

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Trade Settlement Explained

Trade settlement cycle refers to the time period between the execution of a trade and the settlement of the trade, where the buyer and seller exchange payment and ownership of the security. The trade settlement cycle can vary depending on the type of security being traded and the market on which it is traded. Here’s an example of a typical trade settlement cycle: Trade execution: On Monday, an investor buys 100 shares of...


How to Create a Financial Model?

Financial modeling is the process of creating a mathematical representation of a company’s financial situation. It involves analyzing financial data, making projections, and testing scenarios to determine the potential impact on a company’s finances. Here are some steps to make a financial model: Define the objective: Determine the purpose of the financial model and what you want to achieve with it. This could be to forecast financial performance, evaluate investment opportunities, or assess...

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Private Equity

Private equity refers to an investment strategy where institutional investors, high net worth individuals, and private equity firms invest in privately held companies or buyouts of publicly traded companies, with the aim of generating a high return on investment (ROI) over a long-term period. Here’s a brief guide on private equity: Fundraising: Private equity firms raise capital from institutional investors and high net worth individuals, which is used to invest in private companies....

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Cracking IB Job Interview

Cracking an investment banking interview requires preparation, knowledge, and confidence. Here are some tips to help you succeed: Research the firm: Before the interview, research the firm and learn as much as you can about their culture, clients, and recent deals. This will help you demonstrate your interest and knowledge during the interview. Brush up on technical skills: Investment banking interviews often include technical questions, so make sure you are comfortable with financial...

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Top Finance Course

 There are many finance certifications available, and the best one for you will depend on your career goals, experience, and interests. Here are some of the top finance certifications: Certified Public Accountant (CPA): This certification is widely recognized in the accounting industry and covers a broad range of accounting and financial topics. It is typically required for accounting and auditing roles. Chartered Financial Analyst (CFA): This certification is highly respected in the investment...


Factors Impacting NAV

 Net Asset Value (NAV) of a mutual fund represents the total value of the fund’s assets minus its liabilities. The NAV is calculated by dividing the total value of the fund’s assets by the number of outstanding shares. The NAV of a mutual fund can be impacted by several factors, including: Market fluctuations: The value of the securities held by the mutual fund can fluctuate based on changes in market conditions, such as...


How to determine Coupon on Fixed Income?

 The coupon on a fixed income security, such as a bond, represents the interest payment that the issuer agrees to pay the investor for the life of the bond. The coupon rate is typically expressed as a percentage of the bond’s face value, and it is usually paid out to the investor on a regular basis, such as annually or semi-annually. To calculate the coupon payment on a fixed income security, follow these...

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How to do Balance Sheet Substantiation?

Balance sheet substantiation is a process of verifying the accuracy and completeness of the account balances presented on the balance sheet. The process involves reconciling the balances in the general ledger to external sources of information such as bank statements, invoices, and other supporting documentation. Here are the steps involved in the balance sheet substantiation process: Identify the accounts to be substantiated: The first step in the process is to identify the accounts...

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Product Control

Product control is a key function within investment banks that is responsible for ensuring the accuracy and completeness of the financial information produced by the bank. Product control teams work closely with front office trading desks, risk management, and other support functions to provide independent validation of the profitability of trades, the accuracy of risk measurements, and the completeness of financial statements. Product control teams typically perform a range of activities, including: Profit...


Accruals in Fund Accounting

In fund accounting, accruals refer to the recognition of revenues and expenses that have been earned or incurred but have not yet been received or paid. Accruals are an important part of fund accounting as they allow organizations to accurately track their financial performance and report their financial results in a timely and accurate manner. In fund accounting, accruals are recorded using the accrual basis of accounting. Under this basis of accounting, revenues...


Double Entry Accounting

Double-entry accounting is a system of bookkeeping that records each financial transaction in two different accounts – a debit and a credit account. This system is used to ensure that every transaction is accurately recorded and that the accounting records remain balanced. In double-entry accounting, every transaction is recorded in at least two different accounts, with one account being debited and the other account being credited. The total value of the debits must...


Types of Investment methods

There are several stock trading methodologies that investors use to make investment decisions. Here are some of the most common ones: Fundamental Analysis: This methodology involves analyzing a company’s financial statements and other data to determine its intrinsic value. Investors using this approach will typically look at factors such as revenue, earnings, cash flow, and debt levels to make their investment decisions. Technical Analysis: This methodology involves using charts and other technical indicators...


Net Asset Value of Fund

The Net Asset Value (NAV) of a fund is the value of all the assets held by the fund minus any liabilities, divided by the number of outstanding shares. It is essentially the price per share of the fund. The formula for calculating the NAV of a fund is: NAV = (Market Value of Assets – Liabilities) / Number of Outstanding Shares The market value of assets includes all the securities, cash, and...



Many kinds of organizations are involved in clearing and settlement. Their functions vary from market to market, and not all of these organizations exist in every country. For instance, clearinghouse play a key role in the United States and some Asian markets; but in many European markets, depositories are more important. A key role of a clearinghouse is to assist in the  comparison of trades and sometimes, as in the  United States, also...


Corporate Actions

  What is a Corporate Action? A corporate action is any activity that brings material change to an organization and impacts its stakeholders, including shareholders, both common and preferred, as well as bondholders. These events are generally approved by the company’s board of directors; shareholders may be permitted to vote on some events as well. Some corporate actions require shareholders to submit a response.  Types of Corporate Actions  Bonus Issue – Overview ...



SWIFT Message Type Description      MT 500 Instruction to Register MT 501 Confirmation of Registration or Modification MT 502 Order to Buy or Sell MT 502 (FUNDS) Order to Buy or Sell (FUNDS) MT 503 Collateral Claim MT 504 Collateral Proposal MT 505 Collateral Substitution MT 506 Collateral and Exposure Statement MT 507 Collateral Status and Processing Advice MT 508 Intra-Position Advice MT 509 Trade Status Message MT 509 (FUNDS) Trade Status...


Free of payment (FoP)

 free of payment (FoP) A transfer of securities without a corresponding transfer of funds. Free of payment is a settlement method for a securities transaction in which the delivery or reception of the securities is not linked to a corresponding transfer of funds

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Trade Enrichment

Trade Enrichment Trade enrichment is the process of applying relevant information to the trade that is necessary to settle the trade correctly.It has following elements: Trade figuration, that is, calculating trade cash values Trade comparison requirements and validation for counterparties; for example, some trades may not require confirmations to be sent if other trade agreement methods are in place. Trade confirmations to clients carry full details of the trade including fees, commission, and net money....


Interview Questions for Freshers

1)      Explain what is “Over the Counter Market”? Over the counter market is a decentralized market, which does not have a physical location, where market traders or participants trade with one another through various communication modes such as telephone, e-mail and proprietary electronic trading systems. 2)     What is an equity? Equity represents the shareholders’ stake in the company. The calculation of equity is a company’s total assets minus its total...


Finance Q&A

What is ‘financial modelling’? It is a quantitative analysis commonly used for either asset pricing or general corporate finance. What is a ‘cash flow statement’? Yes, lets start with the net income and go line by line explaining all major adjustments to arrive at cash flow from operating activities. Here try to mention all the necessary parts that are associated with it. What is a ‘working capital’? It’s the best defined as current...


Carried interest

Carried interest is generally the largest share of the general partner’s profits from a private equity fund or a hedge fund. The general partner usually receives an annual management fee, often around 2% of assets. Carried interest is often referred to as the “carry.” The carried interest piece is generally a percentage of the profits generated by the fund. Carried interest is the portion of the fund’s profits that the general partner receives...

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Crystallization of fees

Investors typically pay an “incentive fee” to the fund manager to account for profit made by the fund and allocated to investors. Typically this is charged as a percentage of profit, such as 20%. The fee is generally charged quarterly or yearly. If the fund’s allocation period is shorter than the fee period, the fee is accrued over several allocation periods. The fee is said to be uncrystallized as it accrues. If the...


Multi-class fund Structure

Multi-class fund is one of the types of investment fund’s structures. This structure offers investors different types of shares, called classes. Classes can vary according to: Currency Fee/Expenses Structure Distribution policy Type of investors (e.g. institutional vs. retail) Each class will invest in the same “pool” (or investment portfolio) of securities and will have the same investment objectives and policies. But each class may have different currency, fees and/or expenses. This offers investors...


Impact of capstock on NAV

Impact to shares outstanding: Subscription is an investment into the fund. The investor is purchasing Capstock Shares in the fund   Net shares outstanding increase. Redemption is when the investor redeems their investment or sells back the Capstock Shares to the fund  Net shares outstanding decrease. Distribution is when the fund pays a dividend to the investors of the fund (the Capstock holders)  This event has no impact on the number of shares. Why...


Introduction to captstock

Capital Stock (Capstock) refers to the share base of the fund i.e. the number of shares held by the investors. There are 3 main Capstock transactions: subscriptions, redemptions and distributions.  Capstock transactions: Subscriptions/Creations – represent a purchase of capital stock shares/ units. Subscription increases amount of money held by the fund and the number of shares outstanding (i.e. the number of shares owned by investors). Redemptions/ Liquidations/ Cancellations – a person sells their...


Master – Feeder structure

A master-feeder fund is, most commonly, a two-tiered investment structure in which investors deposit capital in a “feeder” fund, which in turn invests in a “master” fund that is managed by the same investment advisor.  The master fund is the entity that invests in the market as prescribed in the partnership agreement. The feeder fund is generally where the capital investing begins: capital (cash or securities) flows from investors into feeders, and these...


Side Pockets

Hedge funds are typically characterized by their focus on liquid assets capable of valuation at regular intervals for the dual purposes of determining the price at which investors subscribe to and redeem from the fund and determining the management and performance fees payable to the investment manager.  However, an existing investment may sometimes become illiquid because it is de- listed/suspended/subject to litigation and therefore hard to value.   Side pockets allow for the...


Contigent redemption equalisation

Contingent redemption\Equalisation Factor approach If  the fund wishes to only  maintain one  NAV per  class another method of equalisation must be adopted. The “contingent  redemption”/equalisation  factor approach  enables the fund to track each investors gain loss and through a series of adjustment, ensure that each investor pays the same performance. 

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Multi-series accounting

Multi Series  Accounting Multi series  accounting is considered one of the simplest and transparent forms of equalisations and is prevalent in a US funds . Under this  method,  instead of having a single class and NAV,  each time an investor subscribes to  the fund,  they are issued with a new series  of shares with a $100 GAV (for example). This is then tracked  separately to the other series  in issue and income/expenses are...



Equalisation is the method used by funds in order to ensure that every shareholder pays the same percentage of performance\incentive fee no matter when they subscribe to the fund. Equalisation is relevant to all funds in which an incentive fee is paid to an investment manager.  This can be done a number of ways  1. Multi Series accounting – Produces a new NAV for each subscription point.  2. Contingent redemption\Equalisation factor approach –...


Swap reset

You can use a Swap Reset transaction to: Record the two parties exchanging the income cash flows that their notional investments have generated since the last reset. Settle the proceeds from trades from the swap contract. Settle the difference between the two parties’ unrealized gain/loss on their notional investments. Pay the pending financing charges on the swap. Renegotiate the swap’s financing terms by selecting different financing investments.


Advance & Arrears Management fee

There are four ways that management fees are typically calculated as follows. Quarterly-in-advance – The manager collects a full quarter of fees calculated off an investor’s opening capital balance for the quarter. Monthly-in-advance – The manager collects a month of fees calculated off an investor’s opening capital balance for the month. Monthly-in-arrears – The manager collects a month of fees calculated off an investor’s ending capital account balance after allocating gains & losses...


Soft & Hard hurdle rate

Soft hurdle – 100 prev nav, 110 current nav, soft hurdle 5% mean performance fee will be charge on whole 10 mean 10*20%= 2 , but in hard hurdle, perf fee will be charged on 105-110 = 5 *20% = 1



To achieve basic objectives and implement fundamental qualities GAAP has four basic assumptions, four basic principles, and four basic constraints. Assumptions Business Entity: assumes that the business is separate from its owners or other businesses. Revenue and expense should be kept separate from personal expenses. Going Concern: assumes that the business will be in operation indefinitely. This validates the methods of asset capitalization, depreciation, and amortization. Only when liquidation is certain is this...



Alternative Investment: An investment that is not one of the three traditional asset types (stocks, bonds and cash). Most alternative investment assets are held by institutional investors or accredited, high-net-worth individuals because of their complex nature, limited regulations and relative lack of liquidity. Alternative investments include hedge funds, managed futures, real estate, commodities and derivatives contracts. Trade Blotter: DEFINITION of ‘Blotter’ A record of trades and the details of the trades made over...


FAQ – Must read

1) What is bond? A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. 2) What is Future? A financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price. 3) What...


Right issue

For hedge fund and mutual fund accounting, what can go wrong with a rights issue? The issue could be missed, processed incorrectly (for example, 4 for 1 instead of 1 for 4) or there could be an error in pricing the rights. Let’s walk through an example of what should happen in fund accounting for a rights issue and consider how this affects, or doesn’t affect, the net asset valuation (the NAV). A...


Types of fund expenses

A fund incurs expenses just like any other business entity. An expense is a cost of doing business.   Because the funds follow the accruals basis of accounting, expenses are accounted for and reported in the accounting period in which they take place (are incurred) rather than the period they are actually paid.   Expenses are accrued for on a daily basis by the Fund Accountant. On payable date of the expense cash settlement occurs. ...


What is the difference between stock split and bonus shares?

Bonus Share: As we know that Bonus is extra some of amount which is paid to a person in addition to the normal wage he gets. In the same way bonus share is extra share issued by the respective firm to its existing share holder without any additional cost. It is sometimes also issued as an alternative to the dividend issued by the firms Bonus shares are preferred by investors as, it gives the liquidity...


What is the difference between ex bonus date and record date?

Ex-date is the date on which the seller, and not the buyer, of a stock will be entitled to a recently announced dividend, bonus or other corporate action. The ex-date is usually a business day prior to the record date, since T+2 trading cycle is followed for clearing and settlement of trades in India.


Can I sell on record date and still get dividend?

Another important note to consider: as long as you purchase a stock prior to the ex-dividend date, you can then sell the stock any time on or after the ex-dividend date and still receive the dividend. A common misconception is that investors need to hold the stock through the record date or pay date.


How do I calculate accrued interest?

First, take your interest rate and convert it into a decimal. For example, 7% would become 0.07. Next, figure out your daily interest rate (also known as the periodic rate) by dividing this by 365 days in a year. Next, multiply this rate by the number of days for which you want to calculate the accrued interest.


Why does net asset value (NAV) drop when a distribution is paid?

Distributions reduce the fund’s NAV/units per share by the amount of the distribution because after the payout, the fund holds less assets. Said another way, the NAV is the value of the underlying assets so when a mutual fund pays out a distribution, it stands to reason that the NAV would drop by that same amount. This table explains what we just said above but with numbers: 5% distribution for a fund with...


Who pays what?

Distributions are allocated to investors according to the number of units they own of the fund on the day prior to the distribution (record date).