- 1.5 credits
- Prerequisite: MBA Core
This course studies basic concepts and institutional features related to financial intermediaries and their role in the allocation of capital. The focus is on commercial banks, but other intermediaries such as S&Ls, investment banks, and insurance companies are also discussed. The course covers how banks add value, what banks do, who their competitors are, and the risks associated with intermediation.
- The role of financial intermediation in the economy: the financial system and its evolution, the role of intermediaries in the allocation of capital, asset transformation versus brokerage.
- The business of banking: financing for small businesses, making credit decisions
- Financing for large businesses: loan syndication, securitization
- Risk management: interest rate risk, credit risk, the use of derivatives to hedge risk, loan restructuring
- Changes in banking: bank consolidation, the role of the internet
Selected cases from Harvard Business School, readings from the press (e.g., Wall Street Journal and the Economist), and journal readings. There is no required text.The grade will be based on grades from a final exam, a course project, cases, and class participation.