This class exists in these courses :
• IÉSEG > IESEG Degree - Programme Grande École > Semester 1 > 2,00 ECTS

Prerequisites

Students who register for this course should be familiar with
1. basic calculus, statistics and probability theory;
2. basics of banking and financial intermediaries (including the Basel 1, 2 and 3 Accords);
3. certain advanced calculus topics such as derivatives, integrals and limits of functions.

Learning outcomes

At the end of the course, the student should be able to:
-understand the basics of risks and risk management in banking;
-understand interest rate risk, interest rate risk types and interest rate derivatives;
-understand various interest rate risk management techniques and measures;
-understand asset liability management;
-understand the deposit contract and insurance.

Course description

This course provides an overview of select advanced topics in risk management in banking. The course starts with some basic principles of risk management in banking industry. The types of interest rate risk that are covered include repricing risk, basis risk, gap risk and reinvestment risk. Next, the students will become familiar with interest rate derivatives and how they are used for hedging and speculating. Interest rate risk management techniques and measures such as the gap model, net interest income analysis, duration, covexity and DV01 will also be discussed. These topics are then generalized to asset-liability management as a central function of banks. In the final part, the course focuses on deposit insurance and its pricing.

Class type

Class structure

Teaching methods

• Interactive class
• Research

Assessment

After the first two days, the students will be assigned a few problems that will represent their take-home assignment and good practice for the final exam. The final exam will involve both theory and problem-type questions.

Recommended reading

• Stuart I. Greenbaum, Anjan V. Thakor: "Contemporary Financial Intermediation" (2007), 2nd Edition, Elsevier Science & Technology - Academic Press -

• Joël Bessis: "Risk Management in Banking" (2010), 3rd Edition, Wiley -

• Don M. Chance: "Analysis of Derivatives for the CFA Program" (2002), Association for Investment Management & Research -

Internet resources

• IESEG Online

  The slides and articles will be posted on line by IESEG.