Topic 1: Commercial and Investment Banks

1. What are banks for?

2. Why do we need FI?
3. What are the functions of a CB?
4. Do banks as a higher or lower debt/equity ratio compared to other firms?
5. What are the consequences of high leverage?
6. What is the formula to calculate NI?
7. What drives interest income?
8. What drives interest expense?
9. What drives non-interest income?
10. What drives non-interest expense?
11. What drives provision for loan losses?
12. Does an NPL always bring to a loss?
13. Describe the transition from a current loan to a charge-off
14. What are the OBS?
15. Where are recorded the OBS activities?
16. What are the major OBS?
17. Why do banks engage in OBS?
18. What are the functions of an IB?
19. What does it mean to underwrite securities?
20. How the IB acts in underwriting securities for a private company?
21. How the IB acts in underwriting securities for a public company?
22. What is a syndicated loan?
23. What are the profitability ratios?
24. What are the asset-quality ratios?
25. What are the liquidity ratios?
26. What is the ROE decomposition?
27. Does bank profitability vary across jurisdictions?
28. What is the difference in the valuation of US banks compared to EU banks?
29. What are the consequences of a low/negative IR environment?
Topic 2: Financial Risks
1. What are the risks associated with IR risk?
2. What is market value risk?
3. When a FI is short-funded?
4. What is the refinancing risk?
5. When a FI is long-funded?
6. What is the reinvestment risk?
7. When can a bank say that has completely eliminated the IR risk?
8. How and why monetary policy affects IR?
9. Who bears IR risk when IR increase?
10. Who bears IR risk when IR decrease?
11. How banks hedge IR risk? Can they completely hedge it?
12. What is market risk?
13. What is the difference between trading portfolios and investment portfolios?
14. What is Credit Risk?
15. Does credit risk increase with longer maturity on loans or securities?
16. What are the different types of loans?
17. What is the credit risk spectrum? How is it associated with the price of the loan?
18. What is the expected return on a loan?
19. Is the default independent from the IR?
20. How is the price of a syndicated loan calculated?
21. What is the loan to value ratio? What does it mean and what are the implications when it
is high?
22. What is the foreign exchange risk?
23. What does it mean that a bank is net long on another currency? What are the implications
of an appreciation/depreciation of the foreign currency?
24. What does it mean that a bank is net short on another currency? What are the implications
of a depreciation/appreciation of the foreign currency?
25. How can the bank completely hedge foreign exchange risk and foreign IR risk?
26. What is the sovereign risk?
27. What is a doom loop?
28. What is OBS risk?
29. What is tech and operational risk?
30. What are the determinants of greater probability of losses from OR?
31. Does it take more time to detect an internal or external fraud?
32. What is liquidity risk?
33. What is the insolvency risk?
Topic 3: Liquidity and Systemic Risk
1. What are the drivers for liquidity risk?
2. How can a bank satisfy liquidity needs after a deposit drain? What are the pros/cons of
each option?
3. How can a bank satisfy liquidity needs after a loan commitment? What are the pros/cons
of each option?
4. How can a bank satisfy liquidity needs after a loss of asset value?
5. What are bank runs?
6. Why a bank run happens?
7. Explain the model of bank run proposed by Diamond Dybvig
8. What are possible remedies for bank runs?
9. What are the necessary features for a DI?
10. Can a DI deal with a systematic crisis?
11. What is the drawback of DI?
12. Explain a banking crisis on the liability side
13. Explain a banking crisis on the asset side
14. What are the two types of systemic risk?
15. What are the contagion mechanisms?
16. What are the causes of a macro shock?
17. Explain the mechanism of a real estate/asset bubble
18. What environment causes a real estate bubble?
Topic 4: SBV case
1. What was the macro scenario before and during the crisis?
2. How was composed the balance sheet of SBV? What was the weakest point?
3. What triggered the expansion of the SBV balance sheet?
4. What happened when the interest rate got higher?
5. What is the reason why deposits change was so massive both in 2019, 2021 (growth) and
2023 (withdraw)?
6. What was wrong in the end?
Topic 5: Interest rate risk
1. What is the ALM?
2. What is the ALCO?
3. What are the two approaches to measure the interest rate risk?
4. What is the Traditional Static Gap Analysis?
5. What happened to the bank’s NII with a positive/negative GAP when interest rate
rise/fall?
6. What happened when a bank has a zero GAP?
7. What is the basic formula for the GAP analysis? What is the main assumption behind it?
8. What are the 3 main criteria to determine if an asset/liability is rate sensitive?
9. When is a bank called an asset-sensitive bank? When is called a liability-sensitive bank?
10. What is the maturity bucket approach? In what is different from the static GAP analysis?
11. What is the difference between the Periodic GAP and cumulative GAP?
12. What can a bank do to increase/decrease asset/liability sensitivity?
13. What is the beta (standardized) GAP? Why is different from the maturity GAP?
14. What is the GAP ratio?
15. What measure the GAP/IEA and the GAP/NW?
16. What is the duration GAP analysis? On what does it focus? Why is different compared to
the other GAP analysis?
17. What is the formula for the Duration GAP?
18. What is the formula for the change in EVE (economic value of equity)?
Topic 6: Securitization
1. What happened in a securitization transaction?
2. What are the 3 phases of securitization?
3. Who are the main players in the securitization process?
4. What is the main economic purpose of a SPV?
5. Who are the investors (ABS holders)?
6. What are ABS? In what they differ from a common debt instrument?
7. What is the meaning of segregation?
8. Who bears the risk of the pool of asset that backs the ABS?
9. What types of assets are in the pool? What are their features?
10. Who are the other secondary players in a securitization transaction?
11. What is servicing?
12. What is credit enhancement? What is the different between internal and external?
13. What are some examples of internal credit enhancement mechanisms?
14. What is the tranching mechanism?
15. What are some examples of external credit enhancement mechanisms?
16. How is an ABS rated? Why can be a conflict of interest in the rating process?
17. What are the different types of securitized transactions?
18. What is the difference between a true-sale and a synthetic securitization?
19. What is the difference between a funded vs unfunded synthetic transaction?
20. Why do banks securitize?
21. What are the advantages of use securitization as a tool to fund rasing?
22. What are the advantages of use securitization as a tool to risk management?
23. What are the credit risk transfer mechanisms?