This course covers the theory and practice of financial intermediation, broadly construed to include banks, savings institutions and investment/merchant banks. Topics will include the role of banking firms in a developed capital market, their impact on corporate financial decisions for non-banking firms, and the regulation of banks. The course includes a comprehensive analysis of the role of financial intermediaries in the development of fixed-income markets and provides an analysis of fixed income securities. Additional topics include models and techniques used for managing credit risk, interest rate risk and liquidity risk. These are applied to maturity matching, duration and immunization, loan sales, securitization, collateralized debt obligations (CDOs), and collateralized mortgage obligations (CMOs).

Upon successful completion of the requirements for this course, students should have the knowledge and skills to:

• Understand the role of banks in an economy and the global trends in banking
• Understand how banks’ lending policies can influence corporate decision making
• Identify and measure banking risks
• Understand credit risk and credit risk management
• Understand debt markets and their role in liquidity management
• Understand interest rate risk and management
• Understand banking regulation globally
• Understand bank loan sales and securitization
• Understand the causes and consequences of bank failure and the global financial crises
• Work in teams and present results.

Assessment in the course is based on a major project, mid-semester examination and final examination.

At least three contact hours per week.

FINM1001 Foundations of Finance

See Course Website

See Course Website