Banking and Insurance Operations


At the end of the semester students should be able to:
- understand the importance and functioning of financial systems
- identify and distinguish the main banking and insurance operations and the risks involved in financial intermediation
- analyse the profitability and financial equilibrium of banks and insurance companies
- Identify, quantify and manage credit risk in banking
- Characterize and estimate interest rate risks
- Implement interest rate risk hedging and immunization strategies using bond portfolios obrigações, FRA's and IRS's
- Analyse and manage exchange rate risk using derivative instruments
- know the main life insurance contracts, calculate premiums and mathematical reserves and analyse the profitability of contracts
- Recognize the main non-life insurance contracts, the principles and risk measures in assessing risks
- Calculate premiums and estimate contract provisions

General characterization





Responsible teacher

Jorge Miguel Ventura Bravo


Weekly - Available soon

Total - Available soon

Teaching language

Portuguese. If there are Erasmus students, classes will be taught in English




Bessis, J. (2010). Risk Management in Banking., 3rd Edition, John Wiley & Sons.; Olivieri, A. and Pitacco, E. (2011). Introduction to Insurance Mathematics: Technical and Financial Features of Risk Transfers. Springer.; Choudhry, M. (2007). Bank Asset and Liability Management: Strategy, Trading, Analysis. John Wiley & Sons.; Martellini, L., Priaulet, P. e Priaulet, S. (2003). Fixed-Income Securities: Valuation, Risk Management and Portfolio Strategies. John Wiley & Sons.; Kaas, R., Goovaerts, M., Dhaene, J., Denuit, M. (2008). Modern Actuarial Risk Theory Using R. 2nd ed, Springer.

Teaching method

Expositional and Questioning Methods
Active Methods and Case Studies
Investigation projects and practical applications.
Knowledge development and learning capability.

Evaluation method

 - Essays and/or problems solving activities (50%)
 - Written exams (50%)

Subject matter

1. Introduction to financial systems: Importance, markets and financial instruments, Portuguese financial system
2. The banking and insurance enterprise: active/passive banking operations, life and non-life insurance contracts, financial goals, risk factors, profitability and financial equilibrium analysis, risk management
3. Modeling and managing bank credit risk: Types of credit, credit policy, identifying and quantifying risk, Rating and Scoring systems, modeling and hedging
4. Measuring and managing interest rate risk - Yield curve: definition, estimation methods, interest rate risk measures, FRA's: pricing and hedging, Hedging and Immunization strategies, IRS's
5. Exchange-rate operations and derivative securities - FOREX market, exchange rate risk analysis, internal and external risk management techniques, and exchange rate forward contracts
6. Life insurance contracts: Analysis and risk management - market overview, types of contracts and risks covered, subscription, reinsurance co-insurance, premium and mathematical reserves calculation. Profitability analysis, managing mortality/longevity risks
7. Non-Life Insurance operations: types of contracts, risks covered, risk assessment principles, risk measures, pricing and reserving methods.