Financial Institutions

Code:

2FI08

Acronym:

FI

Keywords
Classification	Keyword
OFICIAL	Management Studies

Instance: 2012/2013 - 2S

Active?	Yes
Responsible unit:	Management
Course/CS Responsible:	Master in Finance

Cycles of Study/Courses

Acronym	No. of Students	Study Plan	Curricular Years	Credits UCN	Credits ECTS	Contact hours	Total Time
MIF	35	Bologna Official Syllabus	1	-	4	28	108
MIM	0	Bologna Official Syllabus	1	-	4	28	108

Teaching language

English

Objectives

This course is essentially applied. The program is divided into seven sessions, of two parts each. Along the program, a systematic explanation will be provided of the role of different financial institutions, on the major areas of their management issues and of the answers given by the nost recent academic studies, as well as the best management practices in the financial sector.

The program is focused on the areas of risk management of financial institutions, their value creation processes, their specific roles within the financial system in which they operate, the specific nature of their management, and on their management constraints arising from the fact that they are firms subject to supervisions and regulation.

Learning outcomes and competences

The program aims at providing the students the capability to understand the object and the functions of financial institutions and at training them to apply effectively their knowledge in Financial Markets, Theory of Finance and Corporate Finance to grasp an adequate understanding of the main management issues posed to financial institutions.

Working method

Presencial

Pre-requirements (prior knowledge) and co-requirements (common knowledge)

To attend this discipline, it recommended that Students possess a solid background in Theory of Finance and Financial Markets.

Program

1  .  Financial Institutions and Markets

       1.1 . Institutional Functioning of Financial Markets
       1.2 . Financial Markets, Financial Securities and Financial Institutions
       1.3 . The Main Financial Institutions and their Activities
       1.4 . The Portuguese Financial System
       1.5 . Stability and Regulation of Financial Systems

2  .  Understanding Financial Institutions Accounting and Financial Statements

       2.1 . Banks Financial Statements
       2.2 . Insurance Companies Financial Statements
       2.3 . The Financial Statements of Mutual and Pension Funds
       2.4 . The Measurement of Cash-Flows in Financial Institutions

3  .  The Regulation of Financial Institutions

       3.1 . Solvency and Liquidity Control
       3.2 . The Control of Risks
       3.3 . Systemic Stability
       3.4 . The Guaranty of Deposits
       3.5 . The Control of Money Supply

4  .  The Interbank Money Market

       4.1 . The Money Markets and the Interbank Money Market
       4.2 . The Regulation of the Interbank Money Market
       4.3 . The Reference Rates of the IMM and their Behaviour
       4.4 . Operating in the Interbank Money Market

5  .  The Measurement and Interpretation of Financial Institutions Risks

       5.1 . Factors and Measures of Risk
       5.2 . VaR and Capital
       5.3 . Duration and Interest Rate Risk
       5.4 . Options and Convexity Risk
       5.5 . Methods and Problems of Banks Valuation

6  .  The Asset and Liability Management

       6.1 . The Methodology of Asset and Liability Management
       6.2 . Liquidity Mismatch and Gap Analysis
       6.3 . Interest Rate Mismatch and Gap Analysis
       6.4 . Currency Mismatch and Gap Analysis
       6.5 . Risk Management Methods Based on Asset Liability Gap Analysis

7  .  The Theory of Interest Rates and Interest Rate Risk

       7.1 . Interest Rates, Exchange Rates and Inflation
       7.2 . The Term Structure of Interest Rates
       7.3 . The Interest Rate Risk
       7.4 . The Duration Gap
       7.5 . Managing the Banking Spread

8  .  Market-to-Market Management in Financial Institutions

       8.1 . Market Value and NPV
       8.2 . NPV and Interest Rate Risk
       8.3 . NPV and Convexity Risk
       8.4 . The Distribution of NPV and VaR

9  .  Market Risk

       9.1 . The Foundations of Market Risk
       9.2 . The Autonomous Market Risk
       9.3 . Correlations and Multi-Factor Models of Market Risk
       9.4 . Market Risk of Portfolios

10 .  Credit Risk

       10.1. Credit Risk Factors
       10.2. Evaluation, Scoring and Pricing of Credit Risk
       10.3. The Risk of the Credit Portfolio

11 .  Asset Securitization in Financial Institutions

       11.1. Determinants of Securitization Operations
       11.2. The Basic Structure of Securitization Operations
       11.3. The Effects of Securitization in Risk Management

12 .  Investment Banks

       12.1. The Role of Investment Banks in Financial Markets
       12.2. Operations in the Equity and Debt Markets
       12.3. Structured Financing
       12.4. Risk Management in Investment Banks

13 .  Insurance Companies

       13.1. The Nature and Structure of Insurance Companies
       13.2. The Definition of Insurable Risk
       13.3. Insurance Contracts
       13.4. Risk Management in Insurance
       13.5. Insurance Companies and Financial Markets

14 .  Mutual and Pension Funds

       14.1. Mutual Funds and Their Organisation
       14.2. The Structure and Management of Mutual Funds
       14.3. Retirement Benefits Provision and Pension Funds
       14.4. The Management of Pension Funds

15 .  Private Equity Funds

       15.1. The Nature of Private Equity Funds
       15.2. The Structure and Management of Private Equity Funds
       15.3. Corporate Governance of Private Equity Funds

16 .  Hedge Funds

       16.1. Hedge Funds and Mutual Funds
       16.2. The Strategies of Hedge Funds
       16.3. The Structure and Organisation of Hedge Funds
       16.4. The Performance of Hedge Funds

Mandatory literature

Bessis Joel; Risk Management in Banking, John Wiley & Sons, Ltd., 2002. ISBN: 0-471-89336-6 (Strongly recommended text book.)

Teaching methods and learning activities

The program tuition follows an applied approach. There is a concern to analyze the reality of financial institutions, namely banks and insurance companies, as well as other financial companies, addressing real world cases and problems in order to lay down the basic management principles of these institutions, which is sought to be as integrated as possible and distributed by its basic areas. 

Students are encouraged to participate directly in the analysis of problems and real world cases, from the perspective of risk management, using as a basic method the asset liability management approach.

The class is organized into groups, each one of which will submit a team work on a topic or real world case previously assigned to each group.

Evaluation Type

Distributed evaluation with final exam

Assessment Components

Description	Type	Time (hours)	Weight (%)	End date
Attendance (estimated)	Participação presencial	21,00	10,00
Final exam	Exame	2,00	50,00
Team work	Trabalho de campo	21,00	40,00	2013-06-18
	Total:	-	100,00

Eligibility for exams

Students are evaluated on a continuous basis, taking into consideration their work across the whole course, either in the form of theoretical or applied group assignments or from their active participation during lectures. Moreover, every student will sit for a final performance evaluation exam.

Calculation formula of final grade

Students final marks will result from the weighted average of the marks given to the following components:

          Final exam                                                             50%
          Group assignment                                                    40%
          Attendance and participation in lectures                         10%