Section 002: TR 9:30-10:45 am, TISCH LC12
Course Objective and Description:
This course will focus on the financial management and regulation of financial institutions, with a primary focus on commercial banks. Students should be able to comprehend the various forms of risks faced by intermediaries and the trade-offs required in order to balance portfolio risks and returns. The focus will be on the modern techniques of asset, liability and risk management, with an eye towards the regulatory issues on capital adequacy, deposit insurance and risk-shifting as they affect the safety and soundness of the financial system.
Required: Anthony
Saunders, Marcia Cornett, Financial Institutions Management: A Risk
Management Approach, 4th edition, Irwin-McGraw Hill, 2002.
Recommended: "Against the Gods: The Remarkable Story of Risk"
by Peter L. Bernstein
(August 31, 1998) John Wiley & Sons
You are expected to own and be able to use a financial calculator.
You are also expected to subscribe to the Wall Street Journal, or other financial media, and come to class fully aware of what is going on in the financial markets.
Grading:
You will have 3 exams, one on Thursday
October
10, 2002, another one on Thursday
November 14, 2002, and your final will be on December 19, 2002 at
10:00-11:50. The first 2 exams will each count towards
25-35 percent of your total grade. Your final exam will be
cumulative and worth the difference. The exams will add up
to 100 points. Make-ups are
not
possible
for these exams. Class participation, attendance, and occasional
assignments may
be
worth 0-5 % of your overall grade. An attendance sheet may
be passed occasionally. All exams are closed-book, and closed-notes.
Attempts at considering a less-than-honest effort will not be tolerated.
Your grade for the course will be set by how you rank with respect to your
peers based on the Finance Grading Standards as posted on http://www.stern.nyu.edu/fin/
. There are no exceptions to these rules.
There are no additional work that you may ask to do if you do not
like your grade in this course. Once your grade has been submitted
by me to the university, there is nothing left to do for you or me in this
course.
Not All sections of all chapters will be required. Sections to be omitted will be announced in class. Your dedicated attendance will save you time and headaches. The chapters that are in bold will be the ones that have the highest chance of coverage. The other chapters may be covered as time permits. Also, regularly check the web-site for changes and announcements.
Part I: Overview Chapters
1. Introduction
2. Why are Financial Intermediaries Special?
1
3. Financial Services Industry
2-6
Part II: Risks of Financial Institutions
1. Overview of Risks
7
2. Interest rate risk
8,9 (parts of the appendix)
3. Market Risk
10
4. Credit Risk
11,12
5. Off-Balance-Sheet Activities
13
6. Operational and Technology
14
7. Foreign Exchange Risk
15
8. Sovereign Risk
16
9. Liquidity risk
17
Part III: Managing Risks - Regulations
1. Liability and Liquidity Management
18
2. Deposit Insurance
19
3. Capital Adequacy
20
4. Product Diversification
21
5. Geographic Diversification
22-23
6. Loan Sales and Securitization
27-28
7. Swaps
26
If you will download these slides for printing make sure you print as "Pure Black and White" to save on toner, and they will look better.
Please check this space regularly for important announcements related to this course.
For more information on the Fed and
how it operates please get: The Federal Reserve System, Purposes
and Functions, 8th Edition, 1994. This is a free book
that you can obtain by calling the New York Fed at 720-6134, or by visiting
their Public Information Dept. at 33 Liberty Street, 13th Floor, or on
the home page of the Board of Governors of the Federal Reserve System at:
http://app.ny.frb.org/cfpicnic/frame2.cfm?url=http://www.federalreserve.gov/pf/pf.htm