FIN 610 - Risk Management in Banks and Financial Institutions - HWS 2016

Course Content

Modern Financial Institutions (FI) are in the risk management business. In a world of frictionless capital markets, FIs would not exist and individuals would manage their own financial assets and portfolios. But since real-world financial markets are not perfect, FIs provide the positive function of bearing and managing risk on behalf of their customers through the pooling of risks and the sale of their services as risk specialists.

The objective of this course is to provide students with a risk management view of financial institutions (we also use the term financial intermediaries). Traditionally, Banking courses have focused on an overview of the financial services industry, sector by sector, concentrating on balance sheet presentations and overlooking management decision making and risk management.  In contrast, this course will emphasize a risk management approach.

The key areas covered will be:

 (1)  Interest rate risk – the effect of interest rate volatility and the mismatching of asset and liability durations on FI risk exposure.

(2) Market risk – a risk that results when FIs actively trade bonds, equity and foreign currencies.

(3) Credit risk – Measurement of credit risk on individual loans and bonds, asset portfolios, and the effect of loan concentration on risk exposure.

(4)  Off Balance Sheet banking – Securitization (We will not cover other derivative products such as Swaps, Options, Caps, Floors, Collars, Futures, and Forwards etc as they are likely to be the focus of a derivatives course)

The material will be covered with the following principles in mind :

  • To give you the capacity to understand the theory and apply, in real world situations, the techniques that have been developed in finance.

Motto for class: If it cannot be applied, who cares?

  • To give you the big picture of finance so that you can understand how things fit together.

Motto for class: You might forget the details later on, but don’t miss the story.  


Prerequisite for this course is Core Corporate Finance, Fixed Income and Options.  I will assume that you understand the basic concepts of investments, corporate finance, options, accounting and statistics. It is also important to have an overview of the financial services industry, sector by sector, concentrating on balance sheet presentations.   Since we will not cover in depth, the industry details of financial institutions in class, I have enclosed a back ground note on financial institutions in the United States. This is not exhaustive. However, the note will help you acquire a ramp up of these details in a fairly short time. You are expected to read this note before the beginning of the first session.


Class Hours: Thursdays 13:45 to 17:00 @ O131  Location: University of Mannheim




Details about the course content and the schedule can be downloaded Initiates file downloadhere.