Financial Institutions Management Finance 326

Fall 2011 College of Business Administration San Diego State University

Instructor Dr. David Ely Office: Phone: Email: Office Hours: SS 3410 619.594.6842 david.ely@sdsu.edu T 11:00 12:15; W 12:30 1:15; and by appointment

Course Objective The primary objectives of this course are to acquire the skills necessary to contribute toward the management of a financial firm, to describe and apply financial concepts, theories, and tools, and to evaluate the role of technology and the legal, ethical and economic environment as it relates to financial institutions including the Federal Reserve, commercial banks, insurance companies, mutual funds, investment banks, pension funds, federal regulatory agencies, and federal and state guaranty institutions. Primary Learning After completing this course, you should be able to: Outcomes 1. Describe the dimensions of performance and risk relevant to financial firms. 2. Calculate contemporary measures of financial measures of performance and risk. 3. Describe contemporary managerial risk management oversight processes. 4. Explain how the financial services component industries (insurance, banking, securities, real estate and financial planning) interact. 5. Design hedging strategies to manage market risks (e.g., currency, commodity, economic and political). 6. Evaluate the economic environment and the impact of governmental economic policies on consumers and financial institutions. 7. Describe the impact that financial innovation, advances in technology, and changes in regulations has had on the structure of the financial firms/industry Course Prerequisite FIN 323 or equivalent Required materials Anthony Saunders and Marcia Millon Cornett, Financial Markets and Institutions, 4th edition, McGraw Hill. ProBanker Bank Management Simulation access. Blackboard Course material, including supplemental readings and my lecture notes, will be provided on Blackboard. In addition to posting material, we will use the assessment and grade book features of the system. To access Blackboard at SDSU, go to http://blackboard.sdsu.edu

Course Activities Text Readings The Saunders/Cornett text describes the theory and practice of providing financial services from a risk management perspective. The listed reading assignments should be completed prior to class meetings. Solutions to the endof-chapter questions should be prepared for the following class meeting. Bank Management Simulation We will play a bank management game beginning in late September. Groups of 3 students will manage a bank in a simulated competitive market. Decisions on strategy, pricing, capital, investments, and risk management will be made following an analysis of your bank's financial position and markets. One class session will be devoted to introducing the game and organizing teams. Several exercises will be completed individually. Then five rounds of the game will be played in a competitive mode. The grade for the game will be based on: the bank's performance and your ability to explain and justify your bank's decisions. Additional details on this assignment will be provided in class. Instructions on how to access the simulation website will be provided in class. The charge is $25 per student. Examinations The midterm exams and the comprehensive final exam will cover material from the textbook and lectures and will consist of multiple-choice, problems, shortanswer, and essay questions. It will be in a closed-book and closed-notes format. You will need a calculator for exams. No other electronic device (e.g., phone, laptop, iPad, etc.) are permitted during exams. To take exams, students must present a photo ID such as an SDSU ID card or a driver's license. All exams will be retained. Commonly missed questions will be reviewed in class and students are welcome to discuss their individual exams during office hours. Online Quizzes A series of short quizzes will be completed using the quiz feature of Blackboard. These are individual assignments. The schedule of these quizzes will be announced in class. Classroom etiquette Students are expected to attend every class meeting and to participate in a variety of course activities. You may use a labtop/iPad during class sessions for taking notes and viewing lecture notes. However, refrain from activities unrelated to the class discussion.

Finance 326 Financial Institutions Management

Assessment Course grades will be assigned in accordance with San Diego State University policy (see General Catalog, pp. 461-462). Undergraduate grades shall be: A, outstanding achievement; B, praiseworthy performance; C satisfactory performance; D, minimally passing and F, failing. The grade for average undergraduate achievement shall be C. Your course grade will be based on six components with the following weights:

Component Exam 1 Exam 2 Final Exam Probanker Assignment 1 (individual) Probanker Assignment 2 (individual) Probanker Assignment 3 (group) Probanker performance (group) Probanker Summary Report (individual) Online quizzes Total Percentage of total points 93 to 100 90 to 92 87 to 89 83 to 86 80 to 82 77 to 79 73 to 76 70 to 72 67 to 69 63 to 66 60 to 62 0 to 59

Points 100 100 150 10 15 10 15 50 50 500

Guaranteed Course Grade A AB+ B BC+ C CD+ D DF

Cheating and SDSU defines cheating and plagiarism in the following manner.1 Plagiarism Cheating shall be defined as the act of obtaining or attempting to obtain credit for academic work by the use of dishonest, deceptive, or fraudulent means. Examples of cheating include, but are not limited to (a) copying, in part or in whole, from anothers test or other examination; (b) discussing answers or ideas relating to the answers on a test or other examination without the permission of the instructor; (c) obtaining copies of a test, an examination, or other course material without the permission of the instructor; (d) using notes, cheat sheets, or other devices considered inappropriate under the prescribed testing condition; (e) collaborating with another or others in work to be presented without the permission of the instructor; (f) falsifying records,
1

San Diego State University Policy File. pp. 18. 3

Finance 326 Financial Institutions Management

laboratory work, or other course data; (g) submitting work previously presented in another course, if contrary to the rules of the course; (h) altering or interfering with the grading procedures; (i) plagiarizing, as defined; and (j) knowingly and intentionally assisting another student in any of the above. Plagiarism shall be defined as the act of incorporating ideas, words, or specific substance of another, whether purchased, borrowed, or otherwise obtained, and submitting same to the university as ones own work to fulfill academic requirements without giving credit to the appropriate source. Plagiarism shall include but not be limited to (a) submitting work, either in part or in whole, completed by another; (b) omitting footnotes for ideas, statements, facts, or conclusions that belong to another; (c) omitting quotation marks when quoting directly from another, whether it be a paragraph, sentence, or part thereof; (d) close and lengthy paraphrasing of the writings of another; (e) submitting another persons artistic works, such as musical compositions, photographs, paintings, drawings, or sculptures; and (f) submitting as ones own work papers purchased from research companies. Policies on sanctions and due process in review of alleged violations are available at: http://newscenter.sdsu.edu/universitysenate/index.aspx The penalty for academic dishonesty in this course is an F grade. Cases of academic dishonesty will be reported to the Center for Student Rights and Responsibilities.

Tentative Schedule*
August 30, Topic: Introduction September 1 Reading: Chapter 1 End-of-chapter (EOC) Questions: Ch 1 [1,9,11,12,13,14,15,16] September 6, 8 Topic: Commercial banking industry; Bank performance analysis Readings: Chapter 11, 12 EOC Questions: Ch 11 [4,6,10,13,18,19]; Ch 12 [3,8,14,16,17,19,20,21] September 13, 15 Topic: Bank regulation Reading: Chapter 13 EOC Questions: Ch 13 [1,6,9,10,11,12,14,20,23] September 20, 22 Topic: FI risk overview Reading: Chapter 19 EOC Questions: Ch 19 [1,3,4,8,13,17,20] September 27, 29 Topic: Probanker introduction Readings: Probanker Manual October 4 Exam over Chapters 1, 11, 12, 13, and 19 October 6 Topic: Interest rate models Reading: Chapter 2 EOC Questions: Ch 2 [9,11,16,17,18,19,20,23,26,29]

Finance 326 Financial Institutions Management

October 11, 13 Topics: Security valuation; Duration Reading: Chapters 3 EOC Questions: Ch 3 [4,6,14,15,18,19,21,22,23,27] Probanker Assignment #1 due October 13 October 18, 20 Topic: Federal Reserve; Monetary policy Reading: Chapter 4 EOC Questions: Ch 4 [1,8,9,15] Probanker Assignment #2 due October 20 October 25, 27 Topics: Depository institutions; Insurance companies Reading: Chapters 14, 15 EOC Questions: Ch 14 [2,13,15,18,21,25]; Ch 15 [2,10,15,17] Probanker Competitive Decisions #1 due October 25 November 1, 3 Topics: Securities firms; Mutual and hedge funds; Pension funds Readings: Chapter 16, 17, 18 EOC Questions: Ch 16 [1,21,22]; Ch 17 [1,2,5,11,15,22,24]; Ch 18 [3,7,9,12,13] Probanker Competitive Decisions #2 due November 1 November 8 Topic: Managing credit risk Reading: Chapter 20 EOC Questions: Ch 20 [3,4,9,11,13,16,21] November 10 Exam 2 over Chapters 2, 3, 4, 14, 15, 16, 17, and 18 November 15, 17 Topic: Managing liquidity risk Reading: Chapter 21 EOC Questions: Ch 21 [6,8,11,12] ProbankerCompetitive Decisions #3 due November 15 Probank Assignment #3 due November 15 November 22 Topic: Managing Interest-rate risk Reading: Chapter 22 Probanker Decisions #4 due November 22 November 29, Topic: Managing interest rate and insolvency risk December 1 EOC Questions: Ch 22 [2,5,8,10,12,19] Probanker Decisions #5 due November 29 December 6, 8 Topic: Using derivatives to manage risk Readings: Chapters 10, 23 EOC Questions: Ch 10 [9,23,24,25,27]; Ch 23 [5,13,14] Probanker Summary Report due December 8 December 13 Comprehensive Final Exam 10:30-12:30

* Changes, if any, will be announced in class.

Finance 326 Financial Institutions Management