Credit Risk Modelling
Credit Risk Modelling
In-house Training (2 days)

The Credit Risk Modeling Course is very appropriate for those who want to get an understanding of credit risk modeling. Starting from credit scoring and rating, modeling the probability of default, credit risk calculations individually and the portfolio as a whole. It also discusses about model validation. This program can be conducted in your office with approximately 12 hours or according to the needs of your company. In addition to getting the presentation materials of training, participants also get the software Excel-based Monte Carlo Simulation, CreditMetrics and various other spread sheets. Therefore, each participant is expected to bring a notebook on their own.

The agenda includes the following topics:
  • Bank Risk Management: banking crisis, role of banks, balance sheet risk management, sources of risk, risk management process, Basel II regulation, credit risk components, credit risk management, financial products, credit derivatives, collateralized debt obligations
  • Credit scoring: introduction, scoring steps, score types, application scoring, behavioral scoring, performance window, characteristic analysis, expert-guided adjustments, linear weighting, least square regression, logistic regression, discriminant analysis, determine PD, setting cutoffs, scorecard scaling, power curve (Cumulative Accuracy Profile), Gini coefficient, Receiver Operating Characteristic, scoring validation, stability report, delinquency report, scorecard accuracy, credit bureaus, business objective, limitations
  • Computer workshop: credit scoring
  • Credit Rating: introduction, rating and scoring systems, rating terminology, rating system process, rating philosophy, external rating agencies, rating system at banks, application and use of ratings, limitations
  • Risk modeling and measurement: introduction, determining loss due to default/downgrade, estimating PD / LGD / EAD, LossCalc, amortization vs diffusion effect
  • KMV EDF Credit Monitor: introduction, measuring probability of default, loss given default, distance to default, Merton model, implied asset value volatility, expected default frequency (EDF)
  • Computer workshop: EDF
  • Portfolio model for credit risk: introduction, measure of portfolio risk, concentration and correlation, credit loss distribution, Credit VaR: covariance credit portfolio model using beta distribution, Basel II portfolio model, coherent risk measure, expected shortfall, stress test
  • Computer workshop: Credit VaR
  • JP Morgan CreditMetrics: introduction, credit rating transition matrix, spread curve, present value revaluation, incorporating default correlation, usage of Monte Carlo simulation;
  • Computer workshop: CreditMetrics
  • Credit Suisse CreditRisk+: introduction, CreditRisk+ framework, building block in CreditRisk+, CreditRisk+ loss distribution;
  • Monte Carlo simulation: introduction, random generator, probability distribution, Cholesky decomposition, define assumptions, determine forecast variables, calculate credit loss distribution using default mode model, Credit VaR vs expected shortfall
  • Computer workshop: Monte Carlo Simulation