Contemporary Financial Intermediation

Instructor:


Bogdan Stacescu, PhD,

Norwegian Business School

 

Workload:

6,0 ECTS,

 

Prerequisites:

Corporate Finance I, Corporate Finance II

 

Course Description:

 

The main objective of the course is to familiarize students with the main aspects of financial intermediation in general and banking in particular. The importance of financial intermediation and appropriate risk management has been emphasized by the recent financial crisis. Moreover, financial intermediation has evolved rapidly during the last 20 years. It remains an essential end fast evolving part of the economy. Banks are an important component of financial intermediation. Their role, risks and regulation are rapidly changing.

The course mostly concentrates on the informational aspect of banking.

 

 

Course Content:

 

Topic 1: What is financial intermediation? (6 hours)

1.1   The variety of financial intermediaries

1.2   Fractional reserve banking

1.3   A simple model of banks

1.4   Regulation: pros and cons

1.5   Delegated monitoring and large financial intermediaries

 

Topic 2: Major “on-balance-sheet” risks in banking (18 hours)

2.1 Credit risk

2.2 Interest rate risk

2.3 Liquidity risk

2.4 Term structure of interest rate, duration

2.5 Informational issues in loan contracts

2.6 Credit analysis

2.7 Loan pricing

2.8 Credit rationing

2.9 Relationship banking

 

Topic 3: Contingent claims and securitization (8 hours)

3.1 Loan commitments

3.2 Rationale and pricing of loan commitments

3.3 Swaps

3.4 Securitization contracts: a description

3.5 How much is enough of securitization?

3.6 Securitization and financial crisis

 

Topic 4: Deposit contracts (4 hours)

4.1 Design of demand-deposit contracts

4.2 Bank runs

4.3 Deposit insurance: pros and cons

 

Teaching Methods:

Lectures and Seminars, Case studies, Group presentations

 

Course Reading:

Compulsory literature list

 

Books:

[CFI] Greenbaum, Thakor, Contemporary Financial Intermediation, 2nd ed., 2007

 

Supplementary literature list

 

Papers:

[1] D. Diamond, 1985 “Financial Intermediation and Delegated Monitoring” Review of Economic Studies

[2] Boot, A., 2000, “Relationship Banking: What Do We Know?” Journal of Financial Intermediation, vol. 9, 7-25


 

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