Finance 726

Fall 2000

Professor Helwege

email: helwege@cob.ohio-state.edu telephone: 292-3217

office hours: Mondays 1-3 pm in Fisher 812 and by appointment

website: www.cob.ohio-state.edu/~fin/faculty/helwege

Course description:

This is a class on financial institutions in the U.S. with an emphasis on the current structure of the financial services industry and some recent history. The focus of the discussion is the risks these institutions are exposed to and the sources of the risks.

Required texts:

1. Cornett & Saunders, Fundamentals of Financial Institutions Management,

2. Supplemental lecture notes (spiral bound notebook)

Both texts are available in the OSU bookstore.

Grading policy:

Your grade depends on exam grades (the best two of three) and a team assignment. The two best exams each count for 40% of the grade and the team assignment counts for 20%.

The team assignment is to be done in groups of four or five students. Each team member will grade his teammates on a scale of 60 to 100 on participation. If a team member receives a 60 from the majority of his team, his team assignment grades will be .6 times the team's grades on the projects. Otherwise, the grades will be equal to the team's grades. A majority is defined by .5 or higher of the votes. Students may not hand in a team project individually (they will receive a zero), but a team with three or two members may petition for an exception to the size rule. Teams that do not hand in the assignment on time receive a zero. "On time" means by 5:30 pm on the day the assignment is due.

If a student misses one of the exams, the "two best exams of three" will be the only two that were taken. If a student misses two of the exams and hands in the team assignment, he will receive a grade that is two whole letter grades below what would be implied from the available grades. If a student misses all three exams, he/she will fail the course.

None of the exams are cumulative.

Reading assignments and topics schedule:

On the next page is the schedule of topics to be discussed in each lecture. There is some material in the supplemental text for every lecture, although for some topics this material consists entirely of study aids and class media material, rather than new readings. Students are expected to read the entire supplemental lecture notebook plus all of the relevant chapters in the text. Students are encouraged to read the material prior to class, but certainly no later than two weeks after the topic covered in class. Although it may not be clear at all times how important it is to read the textbook, you will find it substantially more difficult to grasp the big picture and to apply the concepts in exam problems if you do not study the Cornett & Saunders textbook.

Students are encouraged to take good notes during class and to review them with their teammates prior to the next class. If there are major areas in need of clarification, please mention them to me.

It is possible that we will not be able to cover all the material on the schedule. If so, the schedule will change, but none of the exam dates or team assignment dates will change.

Schedule of Topics for Finance 726

Dates are tentative and subject to change, except exam and project date.

Date	Lecture number & Topics covered	Readings	Important Dates
9/20	1. Introduction; interest rates	Ch. 1-2, 9
9/25	2. The Fed and Fed funds futures	Ch. 17-18
9/27, 10/2	3. Duration & Convexity; Hedging	Ch. 17-18, 21-23
10/4, 10/9	4. Credit risk/bankruptcy	Ch. 10-11
10/11	First Exam	Topics 1-4	First Exam
10/16	5. Mortgages, prepayment risk	Ch. 12
10/18	6. Securitization, embedded options	Ch. 12, 22
10/23	7. Sovereign risk, exchange rates	Ch. 27-28
10/25	8. I-banks, underwriting, & trading	Ch. 5, 25
10/30	9. IPOs, venture capital	Ch. 25
11/1	10. Mutual funds and pensions	Ch. 7
11/6	Second Exam	Topics 5-10	Second Exam
11/8	11. Bank assets, loan sales	Ch. 3, 12-13, 25
11/13	12. Bank liabilities	Ch. 13-14, 26
11/15	13. Deposit insurance	Ch. 15
11/20,11/22	14. Bank capital	Ch. 8, 16
11/27	15. Savings and loans/credit unions	Ch. 3, 8
11/29	16. Insurance / finance companies	Ch. 4, 6	Project due
12/4	Final Exam	Topics 11-16