Banking and Financial Markets: A Risk Management Perspective

3-4 hours per week

Course Information

Course Length     : 6 weeks 
Estimated Effort  : 3 – 4 hrs per week

Course Overview

The IIMBx MOOC Banking and Financial Markets: A Risk Management Perspective taught by Prof PC Narayan is designed for graduates and professionals in the Banking and Finance sector to enable them to be competent decision-makers from a risk management perspective. It will equip them with the required knowledge about various risk factors and regulatory policies concerning their markets.

Banking and financial markets encompass an ecosystem that channelizes money from those who have it i.e. savers/investors to those who need it i.e. borrowers. This ecosystem also facilitates a cross-border flow of funds through the exchange of currencies. Over the past years, this ecosystem of banks and financial markets (including Central Banks) has deepened in size, sophistication, and complexity. However, in recent times, they have also been the subject of abuse, failures, and economic distress in several countries resulting in a ‘contagion’ that has concurrently affected several countries around the world.

More recently, due to the liberalisation of most economies, the world has witnessed an exponential increase in the free flow of capital across countries. Banking institutions and financial markets, which form the predominant conduit for such a free flow of capital across countries, have, therefore, become even more globally interconnected. Such a globally interconnected financial system—combined with regulatory systems that are country-specific and, hence, varying considerably in rigour and implementation—has further compounded the risks and the consequent contagion, as witnessed in the global financial meltdown that was triggered in 2008.

In the backdrop of this context, it becomes all the more important for organisations to look at banking and financial markets from a risk management perspective.

Professor P C Narayan

Indian Institute of Management Bangalore (IIMB)


Course Syllabus

Week 1: Overview of Risk Management
  • Overview of Risk Management in Banking and Financial Markets
  • Liquidity & Solvency Risk
    • Overview of Liquidity and Solvency
    • Managing Liquidity (CRR and SLR)
    • Managing Solvency & Capital Adequacy (BASEL – I)
    • Liquidity Risk Management
  • Operational Risk
    • Measuring and Managing Operational Risk
Week 2: Credit Risk
  • Risks in Retail Lending
  • Risks in Lending to SMEs
  • Measuring and Managing Credit Risk
  • Monitoring Credit Risk
  • Credit Risk Assessment Models
  • Loan Concentration Risk
  • Loan Portfolio Risk
  • Off-Balance Sheet Risk
Week 3: Interest Rate Risk
  • Overview of Interest Rate Risk
  • Yield Curve: An Overview
  • Measuring and Managing IRR: Repricing Model
  • Measuring and Managing IRR: Duration Gap Analysis
  • Managing IRR using Derivatives
  • Managing IRR Futures
  • Managing IRR Swaps
Week 4: Foreign Exchange Risk
  • Recap of Foreign Exchange Risk Concepts and Terminology
  • Foreign Exchange Risk: Introduction
  • Managing Foreign Exchange Risk: Transaction Exposure, Translation Exposure and Operating Exposure
  • Managing Foreign Exchange Risk using Currency Futures
  • Managing Foreign Exchange Risk using Currency Options
Week 5: Asset Securitization, CDO & CDS
  • Asset Securitization: An Overview
  • Asset Securitization: Basic Attributes, Cash Flows and Structuring
  • Asset Securitization: Payment Structure
  • Types of Securitization: Residential Mortgage Backed Securities (RMBS) and Credit Card Securitization
  • Credit Enhancements using CDS
  • Collateralized Debt Obligations
Week 6: BASEL II, BASEL III and Regulation & Monetary Policy
  • Measuring Risks using VaR (Value at Risk)
  • Basel II Guidelines for Capital Adequacy
  • Basel III Guidelines for Capital Adequacy
  • Measuring Risks using Stress Test
  • Regulation and Monetary Policy for Banks
  • Need for Independence of Central Banks
  • 2008 Financial Crisis
Week 7: Final Exam
  • Testing Time!!

In this course, we will look at Banking and Financial Markets from a Risk Management Perspective.

Upon completing this course, a learner will be able to:

  • Measure and manage credit risk, interest rate risk, foreign exchange risk, operational risk, off-balance-sheet risk, etc. in any financial system.
  • Elaborate on the omnipresence nature and increased complexity of risks as a result of globalisation and interconnectedness of banking and financial markets across countries
  • Identify and manage liquidity and solvency issues in financial institutions and markets
  • Understand the structure of asset securitisation and credit derivatives and their role in managing (sometimes augmenting) risks in any financial system.
  • Measure, quantify, and analyse the level and degree of financial risk over a stipulated time frame using different tools and techniques such as Value at Risk (VaR), Stress Test, etc.
  • Explain the role of regulation and monetary policy in stabilising a financial system and minimising the adverse impacts and contagion effects implicit in any financial crisis, particularly when the financial systems are globally interconnected

Executives, students pursuing post graduate and people aspiring to learn more in the area of banking and finance.

I had a impeccable experience, however i expected more depth in the course as it was a advanced level course. But i have to admit Professor, you are really great. I’m from science background with regular newspaper reading (since i’m preparing for UPSE CSE) but the way you taught was mindblowing. With just few mins of video, making concepts clear is really a achievement. Every moment in the course was amazing, interesting. You gave me sleepless nights (i expected that for every concept you will mention textbooks for further reading, so i was busy searching reference books), this is the most productive lecture i have ever attended (believe me i am not a person who say this frequently). Kindly increase the rigor of the course, i thinking shifting this to a Professional level course would meet my expectation. Assignments should be much more challenging. At the end of the day i had the opportunity to attend a quality course but still i feel more as to be done in terms of depth of the course, textbooks, other deliverables to make me feel that i am attending full time classes in IIM.
Source: Survey Monkey

Swarnavo Paul
Professor and moderator are very helpful to us. I really enjoyed the lesson provided to us. I would like to request them to bring back the course in the near future. I would like to thank for bringing this type of course available online.