Financial Intermediation at Humboldt-Universität Zu Berlin | Flashcards & Summaries

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Lernmaterialien für Financial Intermediation an der Humboldt-Universität zu Berlin

Greife auf kostenlose Karteikarten, Zusammenfassungen, Übungsaufgaben und Altklausuren für deinen Financial Intermediation Kurs an der Humboldt-Universität zu Berlin zu.

TESTE DEIN WISSEN

What are the three principles of Central Banks (Bagehot, 1837)?

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1. lend freely to solvent but illiquid banks

2. charge a penalty interest rate

3. lend against good collateral

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TESTE DEIN WISSEN

Credit Rationing Definition and two types

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TESTE DEIN WISSEN

Lender posts interest rate but then does not lend to all borrowers of that class who want a loan at that interest rate, so that credit demand exceed supply.


Type 1: refusing a loan

Type 2: lending less than requested

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TESTE DEIN WISSEN

What are Deposits?

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TESTE DEIN WISSEN

Short term debt contracts that can be repaid on demand.


Majority of Banks liabilities.

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Allen and Gale - interbank lending model results 

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1. with no FI households prefer not to invest because of high liquidation risk

2.Regional bank can pool risk across households and raise level of investment

3.interbank loans pool liquidation risk across regions and achieve even higher level of investment

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What is securitization?

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Banks originate loans to sell them to Special Purpose Vehicles who sell them to Investors as Asset backed securities.

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TESTE DEIN WISSEN

Four Phases - Global Financial Crisis 2007-2009 

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1. Phase: House prices stop rising, borrowers have trouble refinancing mortgages, doubts about ABS make banks put them back on balance sheets

2. Phase: banks try to sell ABS, prices drop, market dries up

3. Lehman brothers not bailed out by Fed, Investors panic

4.Financial Contagion 

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TESTE DEIN WISSEN

What are loans? What is is specified in loan contracts?

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TESTE DEIN WISSEN

Bilateral debt contracts with specified principal, interest, maturity, repayment schedule.


Often also:

  • collateral
  • seniority
  • covenants





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TESTE DEIN WISSEN
What are examples for Financial Intermediaries?
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Commercial Banks, Investment Banks, Brokers, Rating Agencies, Venture Capitalist Funds, Mutual Funds
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TESTE DEIN WISSEN

How can bank runs be prevented?

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TESTE DEIN WISSEN
  • deposit insurance
  • emergency lending facilities
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TESTE DEIN WISSEN

Why can deposit insurance be seen as a put option? How can its value be determined?

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TESTE DEIN WISSEN
  • Risk of V being lower than B is shifted from bank to deposit insurer

  • Therefore deposit insurance can be seen as a put option ( Banks sells dep insurer V if V<B)
    (Dep insurer needs to buy V if V<B and has to pay the remaining (B-V) to depositors

  • E[ max(0,B-V)]= 0.5 x 0+ 0.5 x (B-(V-X))
    -V: future value of banks assets (put option payoff)
    - B: outstanding deposits (strike price)
    - X: Asset volatility



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TESTE DEIN WISSEN
What is financial intermediation?
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TESTE DEIN WISSEN
The process of facilitating between financial providers and financial users.
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TESTE DEIN WISSEN

Majority of Banks Assets/Liabilities

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  • Assets: Loans
  • Liabilities: Deposits
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  • 164741 Karteikarten
  • 3081 Studierende
  • 72 Lernmaterialien

Beispielhafte Karteikarten für deinen Financial Intermediation Kurs an der Humboldt-Universität zu Berlin - von Kommilitonen auf StudySmarter erstellt!

Q:

What are the three principles of Central Banks (Bagehot, 1837)?

A:

1. lend freely to solvent but illiquid banks

2. charge a penalty interest rate

3. lend against good collateral

Q:

Credit Rationing Definition and two types

A:

Lender posts interest rate but then does not lend to all borrowers of that class who want a loan at that interest rate, so that credit demand exceed supply.


Type 1: refusing a loan

Type 2: lending less than requested

Q:

What are Deposits?

A:

Short term debt contracts that can be repaid on demand.


Majority of Banks liabilities.

Q:

Allen and Gale - interbank lending model results 

A:

1. with no FI households prefer not to invest because of high liquidation risk

2.Regional bank can pool risk across households and raise level of investment

3.interbank loans pool liquidation risk across regions and achieve even higher level of investment

Q:

What is securitization?

A:

Banks originate loans to sell them to Special Purpose Vehicles who sell them to Investors as Asset backed securities.

Mehr Karteikarten anzeigen
Q:

Four Phases - Global Financial Crisis 2007-2009 

A:

1. Phase: House prices stop rising, borrowers have trouble refinancing mortgages, doubts about ABS make banks put them back on balance sheets

2. Phase: banks try to sell ABS, prices drop, market dries up

3. Lehman brothers not bailed out by Fed, Investors panic

4.Financial Contagion 

Q:

What are loans? What is is specified in loan contracts?

A:

Bilateral debt contracts with specified principal, interest, maturity, repayment schedule.


Often also:

  • collateral
  • seniority
  • covenants





Q:
What are examples for Financial Intermediaries?
A:
Commercial Banks, Investment Banks, Brokers, Rating Agencies, Venture Capitalist Funds, Mutual Funds
Q:

How can bank runs be prevented?

A:
  • deposit insurance
  • emergency lending facilities
Q:

Why can deposit insurance be seen as a put option? How can its value be determined?

A:
  • Risk of V being lower than B is shifted from bank to deposit insurer

  • Therefore deposit insurance can be seen as a put option ( Banks sells dep insurer V if V<B)
    (Dep insurer needs to buy V if V<B and has to pay the remaining (B-V) to depositors

  • E[ max(0,B-V)]= 0.5 x 0+ 0.5 x (B-(V-X))
    -V: future value of banks assets (put option payoff)
    - B: outstanding deposits (strike price)
    - X: Asset volatility



Q:
What is financial intermediation?
A:
The process of facilitating between financial providers and financial users.
Q:

Majority of Banks Assets/Liabilities

A:
  • Assets: Loans
  • Liabilities: Deposits
Financial Intermediation

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