Financial Intermediation (SFI)

The course aims at describing the structure of financial intermediaries, and in particular banks. We begin by defining the various types of financial intermediaries, their typical balance sheet and risks they face. We next turn to an analysis of models for quantifying credit risk. We outline the various approaches that are used by banks to quantify and control the risk of their loan portfolios. We also discuss how to manage these risks using credit derivatives and securitization, and their pricing. We then describe methods to quantify and manage interest rate risk, and finally present the Basel regulatory framework.