The course aims at describing the structure of financial intermediaries, and in particular banks, and the tools to manage interest rate and credit risk.
Description / Program
We begin by defining the various types of financial intermediaries, their typical balance sheet and risks they face. We then describe models to quantify the amount of interest rate and liquidity risk that is typically faced by banks. We next turn to an analysis of models for quantifying credit risk. We outline the various approaches that are used by banks to measure the risk of their loan portfolios. We discuss how to manage these risks using credit derivatives and securitization, and their pricing.
Learning Method / Style of Lessons
Lectures will alternate between discussion of new theoretical material and exercise sessions.
Grading is based on an in-class, closed-book final and take-home assignments.
Lecture notes will be made available on the course website. The recommended textbook for the course is “Financial Institution Management” by A. Saunders and M. Cornett
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