Financial Intermediation

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.
Lecture notes will be made available on the course website. The recommended textbook for the course is by Saunders, Anthony, Cornett, Marcia Millon, Erhemjamts, Otgo. Financial institutions management: a risk management approach. Eleventh edition, international student edition. New York, NY: McGraw-Hill, 2024.

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.

In presenza

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 of the analysis addressing the questions that are given, an Excel file with the solution, and a PPT presentation. Files should be uploaded in the system 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 randomly picked group(s) will be required to present their solution. Not showing up in class for discussion, or delivering only a subset of the cases will result in losing the corresponding 20% of the grade.