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Are you preparing for the CA Final AFM examination using questions from the old paper pattern? If the November 2026 MTP includes changes to question formats, paper structure, or marks distribution, relying solely on your usual practice approach may leave gaps in your preparation.
The number of multiple-choice questions (MCQs) has been increased from 15 to 23 in the CA Final AFM New Paper Pattern 2026 indicated for the November MTP. Both 1-mark and 2-mark questions are included in the multiple-choice question (MCQ) portion, but the descriptive part stays the same.
| Exam Pattern Comparison: Earlier Pattern vs November 2026 MTP | ||
|---|---|---|
| Component | Earlier Pattern | November 2026 MTP Pattern |
| Number of MCQs | 15 | 23 |
| MCQ marks | Not specified | 1-mark and 2-mark questions |
| Descriptive section | Not specified | Remains unchanged |
It's crucial to practice both direct and case-based questions because of the updated MCQ count. While some multiple-choice questions (MCQs) explicitly test a topic, others ask you to analyze a scenario and apply the pertinent financial principle.
Note: Use the relevant ICAI examination instructions to verify the final exam pattern and mark distribution.
| Important Revision Topics & Concepts | |
|---|---|
| Topic | Important Concepts to Revise |
| Orange County derivatives case | Aggressive investment strategies, inverse floaters and rising interest rates |
| Japanese candlesticks | White, black and doji candles based on opening and closing prices |
| Credit Default Swaps (CDS) | Default protection, premium calculation and settlement |
| Forex exposure | Short position in pounds and options for currency hedging |
| Convertible bonds | Conversion value, conversion premium, floor value and equity-price movements |
| Adjusted NPV | Separating investment cash flows from financing cash flows |
| Rolling forward | Using successive six-month forward contracts for longer forex exposures |
| Money market hedge | Comparing hedging costs and outcomes |
| Replicating portfolio | Delta and portfolio value in option valuation |
| Risk-neutral valuation | Using risk-neutral probabilities to value options |
The Orange County case serves as a reminder of the dangers associated with aggressive investment techniques when the underlying instruments are not completely grasped. Important aspects of the case that led to significant financial losses and bankruptcy were rising interest rates and the usage of inverse floaters.
When preparing for AFM, pay particular attention to how interest rate fluctuations impact financial instruments and the importance of comprehending risk characteristics prior to taking leveraged or aggressive positions.
Japanese candlesticks show how prices have changed throughout time. Examine the connection between the beginning and closing prices to determine whether a candle is white, black, or doji.
Certain credit-default risk is transferred from one party to another through a Credit Default Swap (CDS). Update the protection buyer's and seller's responsibilities, the protection price, and the potential settlement in the event of a default. Use the numbers and contract terms given in a question to practice computing premiums and settlement amounts.
Forex questions require you to identify the underlying currency exposure before choosing a suitable hedging strategy. For instance, a future payment in pounds exposes the payer to the risk of the pound appreciating against the relevant currency.Currency options can help protect against unfavourable exchange rate movements while allowing the hedger to benefit from favourable movements, depending on the option’s terms and premium paid.During practice, focus on identifying whether the exposure arises from a future payment or receipt, determining which currency movement creates the risk, and selecting the most appropriate hedging instrument.
Convertible bond questions focus on the relationship between a bond and the equity shares into which it may be converted.Key concepts to understand include:
The Adjusted NPV method distinguishes between financing-related effects and investment cash flows. This makes it easier to assess a project's worth while taking its finance arrangements into account.
Modify the way that project cash flows and finance effects are handled independently. Because their treatment may have an impact on the final computation, pay close attention to the assumptions used for interest subsidies and tax benefits.
When a forward contract spanning the whole time is not available, a rolling forward method might help manage a lengthier forex exposure. To cover the necessary exposure, it employs a series of shorter-duration contracts, like six-month forwards.
A money market hedge manages foreign exchange risk through borrowing, lending, and currency conversion when necessary.
| Hedging Comparison: Rolling Forward vs Money Market Hedge | ||
|---|---|---|
| Factor | Rolling Forward | Money Market Hedge |
| Approach | Successive shorter-duration forward contracts | Borrowing, lending and currency conversion |
| Key consideration | Contract availability and renewal terms | Interest rates, exchange rates and cash flows |
| Evaluation | Compare the cost across contract periods | Calculate the domestic-currency cost or value |
| MTP case outcome | Considered as one hedging alternative | More efficient in the particular case |
A replicating portfolio that uses a variety of financial positions to replicate an option's pertinent payoff may be used in option valuation. Delta and portfolio value are crucial computations.
Risk-neutral valuation values options using risk-neutral probabilities. It is important to distinguish these probabilities from the actual probabilities of market outcomes because they are part of a value framework.
Review the construction of a replicating portfolio, the usage of delta, and the contribution of risk-neutral probabilities to option value.
For effective CA Final AFM November 2026 preparation, combine conceptual revision with numerical practice and case-based MCQs.
CA Vipul Dhall is a first-attempt Chartered Accountant and All India Rank 43 in CA Finals, B.Com graduate from Hindu College, University of Delhi, he brings valuable corporate experience from PwC and Bharti Airtel, blending practical industry insights with a strong passion for teaching. With 6+ years of teaching experience, his mission is to inspire students to believe that the CA dream is achievable with the right guidance and discipline.
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