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2020/2021  KAN-COECV2001U  Topics in credit and banking

English Title
Topics in credit and banking

Course information

Language English
Course ECTS 7.5 ECTS
Type Elective
Level Full Degree Master
Duration One Semester
Start time of the course Autumn
Timetable Course schedule will be posted at calendar.cbs.dk
Max. participants 40
Study board
Study Board for MSc in Advanced Economics and Finance
Course coordinator
  • David Lando - Department of Finance (FI)
Main academic disciplines
  • Finance
Teaching methods
  • Face-to-face teaching
Last updated on 28-05-2020

Relevant links

Learning objectives
  • Define regulatory ratios and understand their role in internal capital markets
  • Understand key models and empirics related to the cost of bank capital
  • Understand the organization of trading and the role of funding and regulatory frictions
  • Understand the Vasicek single factor model for loan portfolios and extensions
  • Discuss the design and implication of risk weights
  • Understand bank debt funding markets - pricing and design
  • Understand the pricing and use of CDS and CDOs
  • Understand the essentials of leveraged loans and CLOs
  • Understand some key pricing asset pricing models incorporating leverage constraints and rrwegulatory frictions
  • Underatand benchmark money market rates and key derivatives in this market
  • Discuss challenges to banking in low intereest rate and fintech markets
Course prerequisites
1. The course is an advanced course which will cover current topics in banking, money markets and credit. The course will build on models and quantitative techniques learned in corporate finance, asset pricing and derivatives and risk management. Past performance in these courses (or similar courses in other programmes) will be important criteria if the number of applicants exceeds course capacity. Strong quantitative skills and an interest in applying quantitative models to understanding banking and credit are essential. This course is offered as a special service at short notice to help students who have lost the opportunity to go on exchange (but a lost exchange opportunity is not a prerequisite for registering for the course). Every effort will be made to make the course exciting, clear and relevant, but students looking for a standard course with a standard textbook and a history of past exams and very high degree of predictability should not attend. This course is for students who can work independently, and who are willing to read academic finance papers as part of the curriculum. Derivation and implementation of models will be important. The course will have some overlap with the course FInancial Intermediation offered at the FIN line.

2. Please send in a short motivational letter and a 1 page grade transcript to: ily.stu@cbs.dk before the registration deadline for elective courses.

Please also remember to sign up through the online registration.
Topics in Credit and Banking:
Exam ECTS 7,5
Examination form Oral exam
Individual or group exam Individual exam
Duration 20 min. per student, including examiners' discussion of grade, and informing plus explaining the grade
Preparation time No preparation
Grading scale 7-point grading scale
Examiner(s) Internal examiner and second internal examiner
Exam period Winter
Make-up exam/re-exam
Same examination form as the ordinary exam
Description of the exam procedure

The exam is an oral exam in whcih the students draw a random topic from a list of 8-10 topics for which they have prepared slides. They present directly from the prepared slides for 8-10 minutres,. After that there is 8-10 minutes of questioning selected from the topics not drawn. 

Course content, structure and pedagogical approach

The course will be based on lectures (including guest lectures), student presentations, and discussion.  

Topics covered:

Bank capital allocation and internal capital markets

The cost of bank capital - theory and evidence

Funding and funding frictions in trading (Repo, margin, XVA)

Modeling loan portfolios 

Design of risk weights

Debt funding instruments: Structure, pricing, and role in resolution

The market for Credit Default Swaps and synthetic CDOs

The market for CLOs

Asset pricing with leverage constraints and other regulatory frictions

Money market rates and reform

The pressure on the business model of banks

Description of the teaching methods
Lectures, presentations, discussion
Feedback during the teaching period
Discussion, feedback on presentations.
Feedback weill depend strongly on the students' preparation and willingness to participate in discussions.
Student workload
Teaching 36 hours
Exam 20 hours
Preparation 150 hours
Expected literature

Notes and research papers. Much will be decided in August. 

Last updated on 28-05-2020