Course: Theory of Debt & Bank Lending (5106-512)

Persons:

• Prof. Dr. Hans-Peter Burghof (verantwortlich)

Type of Course:

lecture with exercise

In-Class Hours Per Week:

2

Contents:

The lecture deals with the theoretical foundations behind the credit business of banks and the management of bank credit in banking practice. Topics covered include basic principles of bank lending, the credit business of banks (organization of the credit business, banking regulation, credit analysis and rating, option-based valuation of debt instruments) and the optimality of credit contracts (credit contracts and contract theory, credit under limited liability, information production in credit relationships, credit in the context of incomplete contracts).

Literature:

Freixas, Xavier and Rochet, Jean-Charles (2008): Microeconomics of Banking, 2nd Edition, MIT Press.

Merton, Robert (1974): On the pricing of Corporate Debt: The Risk Structure of Interest Rates. Journal of Finance, vol. 29, 449-470.

Hart,Oliver and Moore, John (1998): Default and Renegotiation: A Dynamic Model of Debt. Quaterly Journal of Economics, vol. 113, 1-41.

Innes, Robert (1990): Limited Liability and Incentive Contracting with Ex-ante Action Choices. Journal of Economic Theory, vol. 52, 45-67.

Stiglitz, Joseph and Weiss, Andrew (1981): Credit Rationing in Markets with Imperfect Information. American Economic Review, vol. 71, 393-410.

Sharpe, Steven (1990): Asymmetric Information, Bank Lending and Implicit Contracts: A Stylized Model of Customer Relationships. Journal of Finance, vol. 45, 1069-1087.

Location:

Hohenheim

Module:

• 5106-510 Banking (compulsory)

eLearning:

Course in ILIAS