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Regular version of the site
Bachelor 2021/2022

Principles of Banking and Finance

Type: Elective course
Area of studies: Economics
When: 2 year, 1-4 module
Mode of studies: distance learning
Online hours: 40
Open to: students of one campus
Instructors: Туманян Микаел Греникович, Кестнер Ирина Владимировна, Гач Иван Петрович, Туманян Микаел Греникович, Кестнер Ирина Владимировна, Nina Azizova, Vincent Fardeau, Darya Litvinova, Alina Myalo, Viktor Kimovich Shpringel, Vasilisa Shuklina
Language: English
ECTS credits: 8
Contact hours: 116

Course Syllabus

Abstract

“Principles of Banking and Finance” is an introductory two-semester course for second-year undergraduate students. The course is taught in English. It is part of the University of London curriculum. The approach of the course is analytical and emphasizes the link between microeconomics and banking and finance. The first part of the course is devoted to principles of finance. It covers the essentials of capital budgeting and securities valuation, as well as basic asset pricing theories and the efficient market hypothesis. The second part deals with principles of banking. It compares different banking systems and discusses the standard tools of risk management for financial institutions, the regulation of the banking system, and the role and rationale of financial intermediation in the economy. Course prerequisites Basic knowledge of micro/ macroeconomics and calculus/statistics, as taught in the first year at ICEF, is required. The course itself provides a basis (and thus serves as a prerequisite) for more advanced courses of in banking and finance such as Asset Pricing and Financial Markets, Corporate Finance, Investment Management, etc.
Learning Objectives

Learning Objectives

  • The course provides students with foundational analytical and institutional knowledge in banking and finance.
  • The first part of the course emphasizes the key concepts of modern theory of finance such as the time value of money, the absence of arbitrage, the trade-off between risk and expected returns, the notion of diversifiable risk and its implications for asset pricing, and the different forms and tests of market efficiency. At the end of this part, students should be able to discuss the main theoretical and empirical drivers of financial and real asset valuation. Students are also expected to acquire general knowledge about standard financial assets and the risks they carry.
  • In the second part of the course, students learn about the consequences of asymmetric information and transaction costs on banking. At the end of the course, they should also be able to highlight the main differences between financial systems, explain the role and origins of financial intermediaries, the methods used by banks to manage various types of risk, and the rationale for bank regulation. Students are also expected to be able to discuss the main factors and developments of the 2007-2009 financial crisis.
Expected Learning Outcomes

Expected Learning Outcomes

  • Discuss the main types of risks faced by banks, and use the main techniques employed by banks to manage their risks
  • Discuss whether stock prices reflect all available information, and evaluate the empirical evidence on informational efficiency in financial markets
  • Discuss why financial systems exist, and how they are structured
  • Explain how to value financial assets (bonds and stocks)
  • Explain how to value real assets and financial assets, and use the key capital budgeting techniques (Net Present Value and Internal Rate or Return)
  • Explain why banks need regulation, and illustrate the key reasons for and against the regulation of banking systems
  • Explain why the relative importance of financial intermediaries and financial markets is different around the world, and how bank-based systems differ from market-based systems
  • Understand how risk affects the return of a risky asset, and hence how risk affects the value of the asset in equilibrium under the fundamental asset pricing paradigms (Capital Asset Pricing Model and Asset Pricing Theory)
  • Understand why financial intermediaries exist, and discuss the role of transaction costs and information asymmetry theories in providing an economic justification
Course Contents

Course Contents

  • Introduction
  • Financial markets and instruments
  • Capital Budgeting and Valuation
  • Valuation of Fixed-Income Securities
  • Risk and return
  • Asset pricing theories
  • Stock valuation
  • Efficient markets
  • Economic analysis of financial structure
  • Financial intermediation
  • Bank management: retail, wholesale, investment banks.
  • Risk management and internal control in banks.
  • Banking regulation.
  • Financial Systems Compared.
Assessment Elements

Assessment Elements

  • non-blocking October midterm
    The October midterm test will have four questions, without possibility of choice.
  • non-blocking Written examination
    Online format
  • non-blocking Spring midterm
  • non-blocking Final written examination (UoL or HSE)
    University of London exam grade for the students studying the course for both Internal and International degrees; ICEF final exam grade for the students studying the course for Internal degree only
  • non-blocking Home Assignments
  • non-blocking Classwork
  • non-blocking Special December home assignment
Interim Assessment

Interim Assessment

  • 2021/2022 2nd module
    0.1 * Classwork + 0.5 * Written examination + 0.15 * Home Assignments + 0.25 * October midterm
  • 2021/2022 4th module
    0.1 * Spring midterm + 0.12 * Written examination + 0.08 * October midterm + 0.1 * Home Assignments + 0.5 * Final written examination (UoL or HSE) + 0.1 * Classwork
Bibliography

Bibliography

Recommended Core Bibliography

  • Corporate finance, Berk, J., 2007
  • Financial institutions management : a risk management approach, Saunders, A., 2018
  • Financial markets and institutions, Mishkin, F. S., 2018
  • Principles of corporate finance, Brealey, R. A., 2008

Recommended Additional Bibliography

  • Comparing financial systems, Allen, F., 2001
  • Financial theory and corporate policy, Copeland, T. E., 2005
  • The UK financial system : theory and practice, Buckle, M., 1998