Course Details

Course Information Package

Course Unit CodeAFIN305
Course Unit Details
Number of ECTS credits allocated5
Learning Outcomes of the course unitBy the end of the course, the students should be able to:
  1. Provide an overview of the financial services industry and different type of financial institutions.
  2. Outline the economic environment and fiscal and monetary policy impact on the performance of financial institutions
  3. Describe the impact of interest rate uncertainty on the asset and liability management of financial institutions
  4. Calculate duration and convexity for option free bonds.
  5. Calculate the duration gap of a Bank and show the impact of a given interest change on the net worth of a Bank.
  6. Demonstrate interest rate hedging techniques via use of swaps, forwards and options.
  7. Describe the regulatory environment of Basel for risk management of financial institutions-explain market risk and credit risk management approaches and capital adequacy requirements
Mode of DeliveryFace-to-face
Recommended optional program componentsNONE
Course Contents

Introduction to financial markets and institutions and the economic environment:

Identify the role of financial intermediaries. Examine the role of commercial banks as providers of funds. Examine international money and capital markets and outline their operations.

Outline basic characteristics of depository Institutions, securities firms and investment banks

Provide and overview of the risks of financial institutions

Explain the main macro-economic policy targets. Evaluate the role of fiscal and exchange rate policy.

Identify the main tools of monetary policy. Analyse the factors that influence inflation including interest rates. Evaluate the role of monetary policy


Introduction to interest rate uncertainty impact on financial institutions performance:

Understand the interest rate sensitive assets and liabilities of financial institutions and the risks involved

Use the reprising and maturity model in order to understand the impact of interest rates on the asset and liabilities of the financial institution


Duration and immunization strategies for financial institutions:

Explain the concept of duration

Calculate duration for different types of fixed income securities

Explain the features of duration as connected with maturity, yield and coupon interest

Use duration measures in order to apply immunization strategies that reduce the impact of interest rate uncertainty


The regulatory environment based on Basel, market and credit risk:

Outline the basic characteristics and requirements of Basel for the management of risk of financial institutions

Explain measurement methods for market risk

Explain Risk Metrics and the simulation approach

Explain Basel standardised approach for managing market risk

Explain the concept of credit risk based on the type of loans (commercial, industrial, real estate and other)

Explain some basic models for the calculation of default risk


Recommended and/or required reading:
  • Saunders, A. Financial Institutions Management: A modern perspective, 3rd edition, 2000
  • Saunders, A. Financial Institutions Management: A modern perspective, 3rd edition, 2000
  • Hull, J. Risk Management and Financial Institutions, Prentice Hall, 2007.
Planned learning activities and teaching methodsThe taught part course is delivered to the students by means of lecturers, conducted with the help of computer presentations and the use of the board. Lecture notes and other course material like spreadsheet examples are available to students through the web
Assessment methods and criteria
Final Exam60%
Language of instructionEnglish
Work placement(s)NO

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