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2024/2025  KAN-CFIAO1006U  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 Third Quarter
Timetable Course schedule will be posted at calendar.cbs.dk
Study board
Study Board for cand.merc. and FIN
Course coordinator
  • David Lando - Department of Finance (FI)
Main academic disciplines
  • Finance
  • Statistics and quantitative methods
Teaching methods
  • Face-to-face teaching
Last updated on 24-05-2024

Relevant links
Learning objectives
The course introduces students to financial intermediation with focus on banking. The goals are
  • to understand the business model of a bank, including the composition of assets and liabilities, the sources of earnings, the associated risks, and how banks are regulated.
  • to apply relevant pricing models for analyzing risk and return of instruments like bank equity, bank debt, hybrid instruments, loans and loan portfolios.
  • to understand the role of banks in domestic and international payment systems, and the role of banks in monetary policy implementation.
Prerequisites for registering for the exam (activities during the teaching period)
Number of compulsory activities which must be approved (see section 13 of the Programme Regulations): 2
Compulsory home assignments
The student must get 2 out of 4 written home assignments approved in order to attend the
ordinary exam. The assignments should be solved in groups of 2-4 students. Maximum of 3 pages per student per assignment.

Students will not have extra opportunities to get the required number of compulsory activities approved prior to the ordinary exam. If a student has not received approval of the required number of compulsory activities or has been ill, the student cannot participate in the ordinary exam.

If a student prior to the retake is still missing approval for the required number of compulsory activities and meets the pre-conditions set out in the program regulations, an extra assignment is possible.

The extra assignment is a 10 page home assignment that will cover the required number of compulsory activities. If approved, the student will be able to attend retake.
Examination
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-point grading scale
Examiner(s) One internal examiner
Exam period Spring
Aids Limited aids, see the list below:
The student is allowed to bring
  • An approved calculator. Only the models HP10bll+ or Texas BA ll Plus are allowed (both models are non-programmable, financial calculators).
  • Language dictionaries in paper format
The student will have access to
  • Advanced IT application package
Make-up exam/re-exam
Same examination form as the ordinary exam
The number of registered candidates for the make-up examination/re-take examination may warrant that it most appropriately be held as an oral examination. The programme office will inform the students if the make-up examination/re-take examination instead is held as an oral examination including a second examiner or external examiner.
Course content, structure and pedagogical approach

The course develops a deep understanding of banking. The course covers the following topics:

  • Balance sheets and financial risks of banks
  • The role of banks in the economy
  • Bank funding
  • Bank risk management
  • Banking regulation
  • Systemic risk in the banking system
  • Securitization, shadow banking
  • Central banks, payment systems, and monetary policy instruments
  • The contingent claims approach to pricing debt, equity, and hybrid securities 
  • The Vasicek model of loan portfolios and the large homogeneous portfolio approximation. Application in regulation and securitization.
  • Bank cost of capital and the Modigliani-Miller propositions 
  • Capital allocation

Excel is used throughout the course wherever relevant
Description of the teaching methods
Lectures with written assignments. Exercise sessions are offered, Some exercises may be integrated into lectures.
Feedback during the teaching period
Feedback is given on homework assignment. In addition, we have five exercise sessions in which the students do problems and have a dialogue with the instructor whenever they ‘stumble’ or are stuck. Students get immediate response to a proposed method or approach. Quizzes or discussion of recent newspaper articles may be used in class to consolidate students' command of the material.
Student workload
Lectures 33 hours
Preparation for lectures 66 hours
Written assignments 40 hours
Exam 4 hours
Final preparation for exam 18 hours
Exercise sessions 10 hours
Preparation for exercise sessions 35 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 24-05-2024