Table of contents for Financial institutions management : a risk management approach / Anthony Saunders, Marcia Millon Cornett.

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Chapter One
Why Are Financial Intermediaries Special?
Financial Intermediaries? Specialness
	FIs Function as Brokers
	FIs Function as Asset Transformers
	Information Costs
	Liquidity and Price Risk
	Other Special Services
Other Aspects of Specialness
	The Transmission of Monetary Policy
	Credit Allocation
	Intergenerational Wealth Transfers or Time Intermediation
	Payment Services
	Denomination Intermediation
Specialness and Regulation
	Safety and Soundness Regulation
	Monetary Policy Regulation
	Credit Allocation Regulation
	Consumer Protection Regulation
	Investor Protection Regulation
	Entry Regulation
The Changing Dynamics of Specialness
	Trends in the United States
	Future Trends
	Global Issues
Appendix 1A
Monetary Policy Tools
Chapter Two
The Financial Services Industry: Depository Institutions
Commercial Banks
	Size, Structure, and Composition of the Industry
	Balance Sheet and Recent Trends
	Other Fee-Generating Activities
	Industry Performance
Savings Institutions
	Size, Structure, and Composition of the Industry
	Balance Sheet and Recent Trends
	Industry Performance
Credit Unions
	Size, Structure, and Composition of the Industry
	Balance Sheet and Recent Trends
	Industry Performance
Global Issues: Europe, Japan, and China
Appendix 2A
Financial Statement Analysis Using a Return on Equity (ROE) Framework
Appendix 2B
Depository Institutions and Their Regulators
Appendix 2C
Technology in Commercial Banking
Chapter Three
The Financial Services Industry: Insurance Companies
Life Insurance Companies
	Size, Structure, and Composition of the Industry
	Balance Sheet and Recent Trends
Property?Casualty Insurance
	Size, Structure, and Composition of the Industry
	Balance Sheet and Recent Trends
Global Issues
Chapter Four
The Financial Services Industry: Securities Firms and Investment Banks
Size, Structure, and Composition of the Industry
Balance Sheet and Recent Trends
	Recent Trends
	Balance Sheet
Global Issues
Chapter Five
The Financial Services Industry: Mutual Funds and Hedge Funds
Size, Structure, and Composition of the Industry
	Historical Trends
	Different Types of Mutual Funds
	Mutual Fund Objectives
	Investor Returns from Mutual Fund Ownership
	Mutual Fund Costs
Balance Sheet and Recent Trends for the Mutual Fund Industry
	Money Market Funds
	Long-Term Funds
Regulation of Mutual Funds
Global Issues in the Mutual Fund Industry
Hedge Funds
	Types of Hedge Funds
	Fees on Hedge Funds
	Offshore Hedge Funds
	Regulation of Hedge Funds
Chapter Six
The Financial Services Industry: Finance Companies
Size, Structure, and Composition of the Industry
Balance Sheet and Recent Trends
	Liabilities and Equity
	Industry Performance
Global Issues
Chapter Seven
Risks of Financial Intermediation
Interest Rate Risk
Market Risk
Credit Risk
Off-Balance-Sheet Risk
Foreign Exchange Risk
Country or Sovereign Risk
Technology and Operational Risks
Liquidity Risk
Insolvency Risk
Other Risks and the Interaction of Risks
Appendix 7A
Commercial Banks? Financial Statements and Analysis
Chapter Eight
Interest Rate Risk I
The Level and Movement of Interest Rates
The Repricing Model
	Rate-Sensitive Assets
	Rate-Sensitive Liabilities
	Equal Changes in Rates on RSAs and RSLs
	Unequal Changes in Rates on RSAs and RSLs
Weaknesses of the Repricing Model
	Market Value Effects
	The Problem of Runoffs
	Cash Flows from Off-Balance-Sheet Activities
Appendix 8A
The Maturity Model
Appendix 8B
Term Structure of Interest Rates
Chapter Nine
Interest Rate Risk II
Duration: A Simple Introduction
A General Formula for Duration
	The Duration of Interest-Bearing Bonds
	The Duration of a Zero-Coupon Bond
	The Duration of a Consol Bond (Perpetuities)
Features of Duration 
	Duration and Yield
	Duration and Coupon Interest
The Economic Meaning of Duration
	Semiannual Coupon Bonds
Duration and Interest Rate Risk
	Duration and Interest Rate Risk Management on a Single Security
	Duration and Interest Rate Risk Management on the Whole Balance Sheet of 
Immunization and Regulatory Concerns
Difficulties in Applying the Duration Model
	Duration Matching Can Be Costly
	Immunization Is a Dynamic Problem
	Large Interest Rate Changes and Convexity
Appendix 9A
The Basics of Bond Valuation
Appendix 9B
Incorporating Convexity into the Duration Model
Chapter Ten
Market Risk
Calculating Market Risk Exposure
The RiskMetrics Model
	The Market Risk of Fixed-Income Securities
	Foreign Exchange
	Portfolio Aggregation
Historic (Back Simulation) Approach
	The Historic (Back Simulation) Model versus RiskMetrics
	The Monte Carlo Simulation Approach
Regulatory Models: The BIS Standardized Framework
	Fixed Income
	Foreign Exchange
The BIS Regulations and Large-Bank Internal Models
Chapter Eleven
Credit Risk: Individual Loan Risk
Credit Quality Problems
Types of Loans
	Commercial and Industrial Loans
	Real Estate Loans
	Individual (Consumer) Loans
	Other Loans
Calculating the Return on a Loan
	The Contractually Promised Return on a Loan
	The Expected Return on a Loan
Retail versus Wholesale Credit Decisions
Measurement of Credit Risk
Default Risk Models
	Qualitative Models
	Credit Scoring Models
Newer Models of Credit Risk Measurement and Pricing
	Term Structure Derivation of Credit Risk
	Mortality Rate Derivation of Credit Risk
	RAROC Models
	Option Models of Default Risk
Appendix 11A
Credit Analysis
Appendix 11B
Black-Scholes Option Pricing Model
Chapter Twelve
Credit Risk: Loan Portfolio and Concentration Risk
Simple Models of Loan Concentration Risk
Loan Portfolio Diversification and Modern Portfolio Theory (MPT)
	KMV Portfolio Manager Model
	Partial Applications of Portfolio Theory
	Loan Loss Ratio?Based Models
	Regulatory Models
Appendix 12A
Credit Metrics
Appendix 12B
Credit Risk+ 
Chapter Thirteen
Off-Balance-Sheet Risk
Off-Balance-Sheet Activities and FI Solvency
Returns and Risks of Off-Balance-Sheet Activities
	Loan Commitments
	Commercial Letters of Credit and Standby Letters of Credit
	Derivative Contracts: Futures, Forwards, Swaps, and Options
	Forward Purchases and Sales of When-Issued Securities
	Loans Sold
Non?Schedule L Off-Balance-Sheet Risks
	Settlement Risk
	Affiliate Risk
The Role of OBS Activities in Reducing Risk
Appendix 13A
A Letter of Credit Transaction
Chapter Fourteen
Foreign Exchange Risk
Foreign Exchange Rates and Transactions
	Foreign Exchange Rates
	Foreign Exchange Transactions
Sources of Foreign Exchange Risk Exposure
	Foreign Exchange Rate Volatility and FX Exposure
Foreign Currency Trading
	FX Trading Activities
	The Profitability of Foreign Currency Trading
Foreign Asset and Liability Positions
	The Return and Risk of Foreign Investments
	Risk and Hedging
	Multicurrency Foreign Asset?Liability Positions
Interaction of Interest Rates, Inflation, and Exchange Rates
	Purchasing Power Parity
	Interest Rate Parity Theorem
Chapter Fifteen
Sovereign Risk
Credit Risk versus Sovereign Risk
Debt Repudiation versus Debt Rescheduling
Country Risk Evaluation
	Outside Evaluation Models
	Internal Evaluation Models
	Debt Service Ratio (DSR)
	Import Ratio (IR)
	Investment Ratio (INVR)
	Variance of Export Revenue (VAREX)
	Domestic Money Supply Growth (MG)
	Using Market Data to Measure Risk: The Secondary Market for LDC Debt
Appendix 15A
Mechanisms for Dealing with Sovereign Risk Exposure
Chapter Sixteen
Technology and Other Operational Risks
What Are the Sources of Operational Risk?
Technological Innovation and Profitability
The Impact of Technology on Wholesale and Retail Financial Service Production
	Wholesale Financial Services
	Retail Financial Services
The Effect of Technology on Revenues and Costs
	Technology and Revenues
	Technology and Costs
Testing for Economies of Scale and Economies of Scope
	The Production Approach
	The Intermediation Approach
Empirical Findings on Cost Economies of Scale and Scope and Implications for 
Technology Expenditures
	Economies of Scale and Scope and X-Inefficiencies
Technology and the Evolution of the Payments System
	Risks That Arise in an Electronic Payment System
Other Operational Risks
Regulatory Issues and Technology and Operational Risks
Chapter Seventeen
Liquidity Risk
Causes of Liquidity Risk
Liquidity Risk at Depository Institutions
	Liability-Side Liquidity Risk
	Asset-Side Liquidity Risk
	Measuring a DI?s Liquidity Exposure
	Liquidity Risk, Unexpected Deposit Drains, and Bank Runs
	Bank Runs, the Discount Window, and Deposit Insurance
Liquidity Risk and Property?Casualty Insurers
Investment Funds
Appendix 17A
Sources and Uses of Funds Statements, Bank of America, December 2005
Chapter Eighteen
Liability and Liquidity Management
Liquid Asset Management
	Monetary Policy Implementation Reasons
	Taxation Reasons
The Composition of the Liquid Asset Portfolio
Return-Risk Trade-Off for Liquid Assets
	The Liquid Asset Reserve Management Problem for U.S. Depository 
	Undershooting/Overshooting of the Reserve Target
	Managing Liquid Assets Other than Cash
Liability Management
	Funding Risk and Cost
Choice of Liability Structure
	Demand Deposits
	Interest-Bearing Checking (NOW) Accounts
	Passbook Savings
	Money Market Deposit Accounts (MMDAs)
	Retail Time Deposits and CDs
	Wholesale CDs
	Federal Funds
	Repurchase Agreements (RPs)
	Other Borrowings
Liquidity and Liability Structures for U.S. Depository Institutions
Liability and Liquidity Risk Management in Insurance Companies
Liability and Liquidity Risk Management in Other FIs
Appendix 18A
Federal Reserve Requirement Accounting
Appendix 18B
Bankers Acceptances and Commercial Paper as a Source of Financing
Chapter Nineteen
Deposit Insurance and Other Liability Guarantees
Bank and Thrift Guaranty Funds
The Causes of the Depository Fund Insolvencies
	The Financial Environment
	Moral Hazard
Panic Prevention versus Moral Hazard
Controlling Depository Institution Risk Taking
	Stockholder Discipline
	Depositor Discipline
	Regulatory Discipline
Non-U.S. Deposit Insurance Systems
The Discount Window
	Deposit Insurance versus the Discount Window
	The Discount Window
Other Guaranty Programs
	National Credit Union Administration
	Property?Casualty and Life Insurance Companies
	The Securities Investor Protection Corporation
	The Pension Benefit Guaranty Corporation
Appendix 19A
Calculation of Deposit Insurance Premiums
Appendix 19B
FDIC Press Releases of Bank Failures
Appendix 19C
Deposit Insurance Schemes for Commercial Banks in Various Countries
Chapter Twenty
Capital Adequacy
Capital and Insolvency Risk
	The Market Value of Capital
	The Book Value of Capital
	The Discrepancy between the Market and Book Values of Equity
	Arguments against Market Value Accounting
Capital Adequacy in the Commercial Banking and Thrift Industry
	Actual Capital Rules
	The Capital?Assets Ratio (or Leverage Ratio)
	Risk-Based Capital Ratios
	Calculating Risk-Based Capital Ratios
Capital Requirements for Other FIs
	Securities Firms
	Life Insurance
	Property?Casualty Insurance
Appendix 20A
Internal Ratings?Based Approach to Measuring Credit Risk?Adjusted Assets
Chapter Twenty-One
Product Diversification
Risks of Product Segmentation
Segmentation in the U.S. Financial Services Industry
	Commercial and Investment Banking Activities
	Banking and Insurance
	Commercial Banking and Commerce
	Nonbank Financial Service Firms and Commerce
Activity Restrictions in the United States versus Other Countries
Issues Involved in the Diversification of Product Offerings
	Safety and Soundness Concerns
	Economies of Scale and Scope
	Conflicts of Interest
	Deposit Insurance
	Regulatory Oversight
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
Chapter Twenty-Two
Geographic Expansion
Domestic Expansions
Regulatory Factors Impacting Geographic Expansion
	Insurance Companies
	Commercial Banks
Cost and Revenue Synergies Impacting Domestic Geographic Expansion by Merger and 
	Cost Synergies
	Revenue Synergies
	Merger Guidelines for Acceptability
Other Market- and Firm-Specific Factors Impacting Domestic Geographic Expansion 
The Success of Domestic Geographic Expansions
	Investor Reaction
	Postmerger Performance
Global and International Expansions
	U.S. Banks Abroad
	Foreign Banks in the United States
Advantages and Disadvantages of International Expansion
Chapter Twenty-Three
Futures and Forwards
Forward and Futures Contracts
	Spot Contracts
	Forward Contracts
	Futures Contracts
Forward Contracts and Hedging Interest Rate Risk
Hedging Interest Rate Risk with Futures Contracts
	Routine Hedging versus Selective Hedging
	Macrohedging with Futures
	The Problem of Basis Risk
Hedging Foreign Exchange Risk
	Estimating the Hedge Ratio
Hedging Credit Risk with Futures and Forwards
	Credit Forward Contracts and Credit Risk Hedging
	Futures Contracts and Catastrophe Risk
	Futures and Forward Policies of Regulators
Appendix 23A
Interest Rate Futures Quotes from The Wall Street Journal Online
Appendix 23B
Microhedging with Futures
Chapter Twenty-Four
Options, Caps, Floors, and Collars
Basic Features of Options
	Buying a Call Option on a Bond
	Writing a Call Option on a Bond
	Buying a Put Option on a Bond
	Writing a Put Option on a Bond
Writing versus Buying Options
	Economic Reasons for Not Writing Options
	Regulatory Reasons
	Futures versus Options Hedging
The Mechanics of Hedging a Bond or Bond Portfolio
	Hedging with Bond Options Using the Binomial Model
Actual Bond Options
Using Options to Hedge Interest Rate Risk on the Balance Sheet
Using Options to Hedge Foreign Exchange Risk
Hedging Credit Risk with Options
Hedging Catastrophe Risk with Call Spread Options
Caps, Floors, and Collars
	Caps, Floors, Collars, and Credit Risk
Appendix 24A
Black-Scholes Option Pricing Model
Appendix 24B
Microhedging with Options
Chapter Twenty-Five
Swap Markets
Interest Rate Swaps
	Realized Cash Flows on an Interest Rate Swap
	Macrohedging with Swaps
Currency Swaps
	Fixed-Fixed Currency Swaps
	Fixed-Floating Currency Swaps
Credit Swaps
	Total Return Swaps
	Pure Credit Swaps
Swaps and Credit Risk Concerns
	Netting and Swaps
	Payment Flows Are Interest and Not Principal
	Standby Letters of Credit
Appendix 25A
Setting Rates on an Interest Rate Swap
Chapter Twenty-Six
Loan Sales
The Bank Loan Sales Market
	Definition of a Loan Sale
	Types of Loan Sales
	Types of Loan Sales Contracts
	Trends in Loan Sales
	The Buyers and the Sellers
Why Banks and Other FIs Sell Loans
	Reserve Requirements
	Fee Income
	Capital Costs
	Liquidity Risk
Factors Affecting Loan Sales Growth
	Access to the Commercial Paper Market
	Customer Relationship Effects
	Legal Concerns
	BIS Capital Requirements
	Market Value Accounting
	Asset Brokerage and Loan Trading
	Government Loan Sales
	Credit Ratings
	Purchase and Sale of Foreign Bank Loans
Chapter Twenty-Seven
The Pass-Through Security
	The Incentives and Mechanics of Pass-Through Security Creation
	Prepayment Risk on Pass-Through Securities
	Prepayment Models
	Government Sponsorship and Oversight of FNMA and Freddie Mac
The Collateralized Mortgage Obligation (CMO)
	Creation of CMOs
	Class A, B, and C Bond Buyers
	Other CMO Classes
The Mortgage-Backed Bond (MBB)
Innovations in Securitization
	Mortgage Pass-Through Strips
	Securitization of Other Assets
Can All Assets Be Securitized?
Appendix 27A
Fannie Mae and Freddie Mac Balance Sheets

Library of Congress Subject Headings for this publication:

Financial institutions -- United States -- Management.
Risk management -- United States.
Financial services industry -- United States -- Management.