The course aims at describing the structure of financial intermediaries, and in particular banks, and the tools to manage interest rate, liquidity and credit risk.
Description / Program
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 interest rate and liquidity risk. We then describe models to quantify the amount of credit risk that is typically faced by bank 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 theoretical material and exercise sessions.
The course grade is based on:
80% in-class, closed-book final
20% take-home group assignments. The group must prepare a short (max 2 pages single-sided) executive summary that summarizes the analysis and addresses the questions that are given, and an Excel file with the solution. Both files should be sent no later than midnight of the due date in order to be considered for grading. The group members are also required to attend the class where the case will be discussed, when a randomly picked group will be required to present their solution.
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.
- Master of Science in Economics in Finance, Core course, Quantitative Finance, 1st year
- Master of Science in Economics in Finance, Core course, Banking and Finance, 1st year
- Master of Science in Financial Technology and Computing, Elective course, 1st year