Banking, Financial Markets and Systems

MBA II Term 4, August - December, 2019

Session-wise schedule Mid-Term to End Term
(Course Instructor: P C Narayan)
Session 11: Overview of Risk Management, Liquidity & Solvency Risk I

Reading: PT ** SC - Chapter 19 - Types of Risk Incurred by Financial Institutions

PT - SC - Chapter 21 – (Pg 598 – Pg 615) Managing Liquidity Risk on the B/S
PT - SC - Chapter 22 - (Pg 638 – 644) Managing Interest Rate Risk and Insolvency Risk
on the B/S
CM Section 1 - Statutory Reserve Requirements
Section 2 - Capital Adequacy Requirements
Videos:
BFM 3.1 Overview of Risk Management in Banking and Financial Markets
BFM 5.1 Overview of Liquidity and Solvency
BFM 5.2 Managing Liquidity (CRR and SLR)
BFM 6.1 Managing Solvency and Capital Adequacy

Session 12: Liquidity & Solvency Risk II, Operational Risk and Off Balance-
sheet risk.
Reading: CM Section 3 - Liquidity Risk Management
Section 4 - FRBSF Economic Letter: What is Operational Risk?

Videos:
BFM 5.3 Managing Liquidity Risk
BFM 4.3 Off-Balance Sheet Risk
BFM 4.4 Operational Risk

Session 13: Credit Risk I

Reading:
SC - Chapter 20 - (Pg 571– Pg 581) Managing Credit Risk on the Balance Sheet
PT **ME - Chapter 19 - (Pg 483- Pg 487) Risk Management in Financial Institutions-
Managing Credit Risk
Videos:
BFM 3.2 Risks in Retail Lending
BFM 3.3 Risks in Lending to SMEs
BFM 3.4 Measuring and Managing Credit Risk

*CM: Course Material comprising handouts given at the start of the term
** PT - ME: Prescribed Textbook, “Financial Markets and Institutions” by Fredric Mishkin and Stanley Eakins, 8th
edition, published by Pearson (ME)
** PT- SC : Prescribed Textbook “Financial Institutions Management” , 3 rd edition by Anthony Saunders and
Marcia Million Cornett (SC)

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Session 14: Credit Risk II
Reading: PT - SC - Chapter 20 - (Pg 586 – Pg 597) Managing Credit Risk on the Balance Sheet

Videos:

BFM 3.5 Monitoring Credit Risk

BFM 4.1 Credit Risk Assessment Models
BFM 4.2 Loan Concentration Risk & Loan Portfolio Risk

Session 15: Interest Rate Risk I

Reading: PT - SC - Chapter 22 – (Pg 622 – Pg 638) Managing Interest Rate Risk and Insolvency
Risk on the B/S
PT - ME - Chapter 19 - (Pg 487- Pg 500) Risk Management in Financial Institutions
Managing Interest rate Risk
CM Section 5 - Interest rate Risk Management

Videos:
DMM 3.2 Overview of Interest Rate Risk
DMM 3.3 Measuring and Managing IRR: Repricing Gap Analysis
DMM 3.4 Macaulay Duration, Modified Duration and Convexity
DMM 3.5 Measuring and Managing IRR: Duration Gap Analysis

Session 16: Interest Rate Risk II

Reading: PT - SC - Chapter 10 - (Pg 294- 305) Derivatives Securities Markets, Int rate Futures
- (Pg 318 - 322) Interest Rate Swaps
PT - SC - Chapter 23 - Managing Risk with Derivative Securities
PT - ME - Chapter 20 - (Pg 505 - Pg 519) Hedging with Financial Derivatives
- (Pg 530- Pg 533) Interest Rate Swaps

Videos:
DMM 4.2 Interest Rate Derivatives
DMM 4.3 Hedging Using Interest Rate Futures
DMM 4.4 Interest Rate Swaps

Session 17: Assets Securitization, CDO & CDS I

Reading: PT - SC - Chapter 7 - Mortgages Market
Chapter 24 - Managing Risk with Loan Sales & Securitization
CM Section 6 - Asset Backed Securities

Videos:
STRM 1.1 Asset Securitization: An Overview
STRM 1.2 Asset Securitization: Basic Attributes, Cash Flows and Structuring
STRM 1.3 Asset Securitization: Payment Structure
STRM 1.4 Asset Securitization: Credit Rating and Credit Enhancements

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Session 18: Assets Securitization, CDO & CDS II
Reading: CM Section 7 - Process not Product: The CDO beat goes on
J. Paul Forrester, Mayer, Brown, Rowe & Maw
- The ABC of CDO’s and the subprime crisis
Vinod Kothari & Rochak Agarwal

Videos:
STRM 1.5 Types of Securitization: Residential Mortgage Backed Securities (RMBS) and Credit Card
Securitization
STRM 1.6 Credit Enhancements using Credit Default Swaps (CDS)
STRM 1.7 Collateralized Debt Obligations (CDOs)

Session 19: VaR, BASEL II, BASEL III Guidelines

Reading: CM Section 8 - Risk Management & BASEL II P C Narayan CIMA Symposium 2008
- BASEL II Accord and its Implications - V Leeladhar
- Implementation of BASEL II : An Indian Perspective
Section 9 - BASEL III Accord - Rajesh Goyal
- BASEL III Financial Risk – Hugo Nordell & Jens Ronnqvist
Videos:
STRM 2.1 Value-at-Risk: An Overview
STRM 2.2 Computing Value-at-Risk (VaR)
STRM 2.6 Stress Testing

STRM 3.2 Basel-II Guidelines for Capital Adequacy

STRM 3.3 Basel-II.5 (Extension to Basel II)
STRM 3.4 Basel-III Guidelines: A Critical View
STRM 3.5 Basel-IV Guidelines: An Outlook
Optional Viewing
STRM 2.3 Expected Shortfall (Conditional Value-at-Risk)
STRM 2.4 Back Testing Value-at-Risk
STRM 2.5 Quantifying Volatility in Value-at-Risk Models
STRM 2.7 Reverse Stress Testing

Session 20: Regulatory & Monetary Policy, 2008 Crisis

Reading: CM Section 10 - Monetary Policy - Goals, Framework, Process and Instruments
- Financial Regulatory bodies in India
- Monetary Policy: Some Questions Answered C. Rangarajan
Section 11 - What Went Wrong? The Economist
- How We Got into the Subprime Lending Mess Knowledge Wharton
- Street of Fear ; Bear Stearns may not be the last surprise in the
Saga Business Week
- Financial Reform in the US : A Brief Overview EPW
Videos:
STRM 3.1 2008 Global Financial Crisis: Genesis and Consequences
BFM 6.2 Regulation and Monetary Policy for Banks
BFM 6.3 Need for Independence of Central Bank
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