FIN 684: Financial Institutions II

This course provides an in-depth look at financial institutions and the role they play for financial markets today. The course will address questions such as: Which financial institutions exist? Why do they exist? What risks do they face? How do they manage those risks? How does the behavior of financial institutions impact financial markets and asset prices? How does their behavior impact the economy at large? How should we regulate financial institutions? The course Financial Institutions II will put emphasis on important non-bank financial institutions (e.g., pension funds, mutual funds, hedge funds etc.).

Learning outcomes
After completing this course, students will have a thorough understanding of the economic reasons for the existence of non-bank financial institutions. Students will understand the eco-system of non-bank financial institutions and their role in the global financial markets. Students will gain knowledge about what risks managers in non-bank financial institutions face and how they manage those risks. Students will also learn how non-bank financial institutions impact asset prices and financial market outcomes. Finally, students will learn about current approaches and proposals for regulating financial institutions.

Necessary prerequisites

Recommended prerequisites
Every student participating in this course should have completed the equivalent of the 2-semester finance module, which is part of the Mannheim Bachelor program. The lectures generally assume basic knowledge in accounting (balance sheets, income statements, financial ratios), finance (present value methods, portfolio theory, CAPM), mathematics (calculus, optimization) and statistics (mean, variance, standard deviation, univariate and multivariate regressions). It is strongly recommended that students take the course Financial Institutions I (FIN 590) before taking Financial Institutions II (FIN 684).

Contact hoursIndependent study time
Lecture2 SWS9 SWS
Form of assessmentWritten exam (closed book, 60 min.)
Restricted Admissionno
Further information
Performing lecturer
Prof. Dr. Oliver Spalt
Prof. Dr. Oliver Spalt
OfferingSpring semester
Duration of module 1 semester
Range of applicationM.Sc. MMM, M.Sc. WiPäd, M.Sc. VWL, M.Sc. Wirt. Inf., M.Sc. Wirt. Math., MAKUWI
Preliminary course work
Program-specific Competency GoalsCG 1
Graded yes
LiteratureAcharya, V. V., Schnabl, P., & Suarez, G. (2013). Securitization without risk transfer. Journal of Financial Economics, 107(3), 515–536.
Adrian, T., & Ashcraft, A. B. (2016). Shadow banking: a review of the literature. Banking crises, 282–315.
Coval, J., Jurek, J., & Stafford, E. (2009). The economics of structured finance. Journal of Economic Perspectives, 23(1), 3–25.
Gorton, G., & Metrick, A. (2012). Getting up to speed on the financial crisis: a one-weekend-reader's guide. Journal of Economic Literature, 50(1), 128–50.
Gorton, G., & Metrick, A. (2012). Securitized banking and the run on repo. Journal of Financial Economics, 104(3), 425–451.
Hanson, S. G., Shleifer, A., Stein, J. C., & Vishny, R. W. (2015). Banks as patient fixed-income investors. Journal of Financial Economics, 117(3), 449–469.
Financial Crisis Inquiry Commission. (2011). The financial crisis inquiry report: The final report of the National Commission on the causes of the financial and economic crisis in the United States including dissenting views. Cosimo, Inc..
Course outline1. Introduction
2. Shadow Banking Basics: Market Structure
3. Shadow Banking Basics: Theory
4. Securitization
5. Crisis of 07–08: Early Stage of the Crisis
6. Crisis of 07–08: Pre-Crisis Short-Term SB Funding
7. Crisis of 07–08: The Crisis Unfolding
8. Crisis of 07–08: Fall of Lehman and Aftermath
9. Institutional Investors and ESG Investing