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2017/2018  KAN-CFIVO1006U  Financial Intermediation

English Title
Financial Intermediation

Course information

Language English
Course ECTS 7.5 ECTS
Type Mandatory
Level Full Degree Master
Duration One Quarter
Start time of the course Spring
Timetable Course schedule will be posted at calendar.cbs.dk
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • David Lando - Department of Finance (FI)
Main academic disciplines
  • Finance
  • Statistics and quantitative methods
Last updated on 30-05-2017

Relevant links

Learning objectives
To achieve the grade 12, students should meet the following learning objectives with no or only minor mistakes or errors: The course introduces students to financial intermediation with a main focus on banking. Upon completion of the course the student should be able to:
  • Explain the assets, liabilities and key sources of risk of some main types of financial intermediaries, including banks, investment banks, pension funds, mortgage institutions, and insurance companies
  • Explain the key roles performed by banks in an economy including the role in the domestic and international payment system, maturity transformation, screening and monitoring of borrowers, and in the implementation of monetary policy
  • Explain and discuss the composition and riskiness of bank assets for a representative bank
  • Explain different short-term and long-term funding sources of banks, including deposits, interbank loans, repos, commercial paper, medium term notes, covered bonds, contingent capital, equity, funding in foreign currency, FX swaps
  • Understand a model for bank runs
  • Use a structural (Merton) model of credit risk to value debt and equity and use the model flexibly to analyze deposit insurance, risk taking incentives, etc.
  • Explain the concept and importance of off-balance sheet commitments .Explain and discuss shadow banking
  • Explain the rationale behind banking regulation and discuss whether higher capital requirements affect bank lending. Explain and discuss key concepts in financial regulation such as risk weighted assets, capital ratios, the leverage ratio, net stable funding ratio, liquidity coverage ratios
  • Understand and apply the single factor portfolio credit risk model
  • Explain securitization and apply the single factor model to pricing of tranches with different priority in asset securitizations
  • Understand the notion of systemic risk in the banking system and discuss the regulation of systemically important banks
  • Understand the tools of monetary policy applied by central banks and how they operate through the banking system
Prerequisites for registering for the exam
Number of mandatory activities: 2
Compulsory assignments (assessed approved/not approved)
Two written assignments have to be passed before participating in the final written report.
A third assignment will be given if you do not pass assignment 1 or 2.
Both assignments cannot be re-examined within the same semester.
The assignments should be solved in groups of 2-4 students. Maximum of 15 pages per group per assignment.
Financial Intermediation:
Exam ECTS 7,5
Examination form Written sit-in exam on CBS' computers
Individual or group exam Individual exam
Assignment type Written assignment
Duration 4 hours
Grading scale 7-step scale
Examiner(s) One internal examiner
Exam period Spring
Aids Limited aids, see the list below:
The student is allowed to bring
  • USB key for uploading of notes, books and compendiums in a non-executable format (no applications, application fragments, IT tools etc.)
  • Any calculator
  • Books (including translation dictionaries), compendiums and notes in paper format
The student will have access to
  • Access to the personal drive (S-drive) on CBS´ network
  • Advanced IT application package
At all written sit-in exams the student has access to the basic IT application package (Microsoft Office (minus Excel), digital pen and paper, 7-zip file manager, Adobe Acrobat, Texlive, VLC player, Windows Media Player). PLEASE NOTE: Students are not allowed to communicate with others during the exam : Read more about exam aids and IT application packages here
Make-up exam/re-exam
Same examination form as the ordinary exam
If the number of registered candidates for the make-up examination/re-take examination warrants that it may most appropriately be held as an oral examination, the programme office will inform the students that the make-up examination/re-take examination will be held as an oral examination instead.
Course content and structure

The course develops a deep understanding of financial markets and how investors use the securities traded in financial markets. The course covers the following topics:

  • Balance sheets and financial risks of financial intermediaries
  • The role of banks in the economy
  • Bank funding
  • Liquidity and credit  risk management
  • Bank regulation
  • Systemic risk in the banking system
  • Securitization, shadow banking
  • Central banks and monetary policy instruments

Excel is used throughout the course wherever relevant

Teaching methods
Lectures with written assignments. Exercises are integrated into lectures
Feedback during the teaching period
Feedback is given on both homework assignments.
Student workload
Lectures 33 hours
Preparation for lectures 99 hours
Written assignments 50 hours
Exam 4 hours
Final preparation for exam 20 hours
Expected literature
  • Selected academic papers, including central bank publications
  • Lecture notes by David Lando
  • Annual reports and risk reports of major banks
Last updated on 30-05-2017