Financial Institutions Management: A Risk Management Approach

Anthony Saunders is the John M. Schiff Professor of Finance and the Chair of the Department of Finance at the Stern School of Business at New York University. Professor Saunders received his PhD from the London School of Economics and has taught both undergraduate and graduate level courses at NYU since 1978. Throughout his academic career, his teaching and research have specialized in financial institutions and international banking. He has served as a visiting professor all over the world, including INSEAD, the Stockholm School of Economics, and the University of Melbourne. He is currently on the Executive Committee of the Salomon Center for the Study of Financial Institutions, NYU.His research has been published in all the major money and banking and finance journals and in several books. In addition, he has authored or co-authored several professional books, the most recent of which is Credit Risk Measurement: New Approaches to Value at Risk and Other Paradigms, John Wiley and Sons, New York, 1999.



Marcia Millon Cornett Robert A. and Julia E. Dorn Professor of Finance at Bentley University. She received her B.S. degree in economics from Knox College in Galesburg, Illinois, and her M.B.A. and Ph.D. degrees in finance from Indiana University in Bloomington, Indiana. Dr. Cornett has written and published several articles in the areas of bank performance, bank regulation, corporate finance, and investments. Articles authored by Dr. Cornett have appeared in such academic journals as the Journal of Finance; the Journal of Money, Credit, and Banking; the Journal of Financial Economics; Financial Management; and the Journal of Banking and Finance. She was recently ranked the 124th most published out of more than 17,600 authors and the number five female author in finance literature over the last 50 years. Along with Anthony Saunders, Dr. Cornett has recently completed work on the ninth edition of Financial Institutions Management (McGraw-Hill Education) and the sixth edition of Financial Markets and Institutions (McGraw-Hill Education). Professor Cornett serves as an associate editor for the Journal of Banking and Finance, the Journal of Financial Services Research, Review of Financial Economics, Financial Review, and Multinational Finance Journal. Dr. Cornett has served as a member of the board of directors, the executive committee, and the finance committee of the SIU Credit Union. Dr. Cornett has also taught at Southern Illinois University at Carbondale, the University of Colorado, Boston College, and Southern Methodist University. She is a member of the Financial Management Association, the American Finance Association, and the Western Finance Association.

Part I Introduction

Ch. 1 Why Are Financial Institutions Special?

Appendix 1A The Financial Crisis: The Failure of Financial Services Institution Specialness (online)

Appendix 1B Monetary Policy Tools (online)

Ch. 2 Financial Services: Depository Institutions

Appendix 2A Financial Statement Analysis Using a Return on Equity (ROE) Framework (online)

Appendix 2B Commercial Banks Financial Statements and Analysis (online)

Appendix 2C Depository Institutions and Their Regulators (online)

Appendix 2D Technology in Commercial Banking (online)

Ch. 3 Financial Services: Finance Companies

Ch. 4 Financial Services: Securities Brokerage and Investment Banking

Ch. 5 Financial Services: Mutual Funds and Hedge Funds

Ch. 6 Financial Services: Insurance

Ch. 7 Risks of Financial Institutions

Part II Measuring Risk

Ch. 8 Interest Rate Risk I

Appendix 8A The Maturity Model (online)

Appendix 8B Term Structure of Interest Rates

Ch. 9 Interest Rate Risk II

Appendix 9A The Basics of Bond Valuation (online)

Appendix 9B Incorporating Convexity into the Duration Model

Ch. 10 Credit Risk: Individual Loan Risk

Appendix 10A Credit Analysis (online)

Appendix 10B Black-Scholes Option Pricing Model (online)

Ch. 11 Credit Risk: Loan Portfolio and Concentration Risk

Appendix 11A CreditMetrics

Appendix 11B CreditRisk+

Ch. 12 Liquidity Risk

Appendix 12A Sources and Uses of Funds Statement, Bank of America, March 2012 (online)

Ch. 13 Foreign Exchange Risk

Ch. 14 Sovereign Risk

Appendix 14A Mechanisms for Dealing with Sovereign Risk Exposure

Ch. 15 Market Risk

Ch. 16 Off-Balance-Sheet Risk

Appendix 16A A Letter of Credit Transaction (online)

Ch. 17 Technology and Other Operational Risks

Part III Managing Risk

Ch. 18 Liability and Liquidity Management

Appendix 18A Federal Reserve Requirement Accounting (online)

Appendix 18B Bankers Acceptances and Commercial Paper as Sources of Financing (online)

Ch. 19 Deposit Insurance and Other Liability Guarantees

Appendix 19A Calculation of Deposit Insurance Premiums

Appendix 19B FDIC Press Releases of Bank Failures (online)

Appendix 19C Deposit Insurance Coverage for Commercial Banks in Various Countries (online)

Ch. 20 Capital Adequacy

Appendix 20A Internal Ratings-Based Approach to Measuring Credit Risk-Adjusted Assets

Appendix 20B Methodology Used to Determine G-SIBs Capital Surcharge (online)

Ch. 21 Product and Geographic Expansion

Appendix 21A EU and G-10 Countries: Regulatory Treatment of the Mixing of Banking, Securities, and Insurance Activities and the Mixing of Banking and Commerce (online)

Ch. 22 Futures and Forwards

Appendix 22A Microhedging with Futures (online)

Ch. 23 Options, Caps, Floors, and Collars

Appendix 23A Black-Scholes Option Pricing Model (online)

Appendix 23B Microhedging with Opt...