Course description
Course: SPECIAL ISSUES IN BANKING THEORY
Code: FIN464
Semester: B
Tutor: D. Vasiliou
The scope of this course is to study the banking sector, which undergoing a fast diversification in a deregulating environment of financial markets. The pros and cons of universal vs. separated into commercial and investment banking are also analyzed. Students will learn how the banking sector has been developed from a strictly regulated public sector to its present status of a fully liberalized industry, competitive not only on a national basis but internationally. Specific issues cover the regulation of the banking system, emphasizing on Basel framework I, II and III. The role of the banking sector in the money supply in relation to the monetary control by the central banks is also discussed. Other issues deal with the risk and return along with the asset management of banking institutions based on the duration gap methodology. Students will understand how a dealer takes long and short positions on securities and how they valuate stocks and bonds. Malkiel’s theorems on bonds constitute one of the main issues of this course in order to clarify why the characteristics of bonds are essential for the dealers’ actions. Students will also learn how to use derivatives either in organized exchange markets or OTC, for hedging, speculation or arbitrage, mainly on futures, options, forwards and swaps. Especially for options, bull and bear hedging strategies are covered. Students will also learn how to use CAMELS in order to examine the viability of banks. Last but not least, students will learn how retail banking is working including securitization, leasing, factoring and forfaiting.
- The history of banking theory: from the separated to the universal banking
- Valuation of fixed income assets, duration, modified duration and asset – liabilities management for banking institutions
- Derivatives in organized exchanged markets and OTC. Bull and Bear spread strategies
- Banking regulation: Basel I, II and III
- Valuation and ranking of banks with the CAMELS methodology and the implementation of stress tests
- Retail banking and securitization
- Leasing, factoring and forfaiting
- Current trends in the banking system and the stability funds