Hands-on training course on credit risk modelling

Course description
Agenda
Who should attend
Prerequisites
Course fee
Date & venue
How to apply

 Download info (English)

Download info (Chinese)

Course description

The current turmoil in the financial industry due to the sub-prime crisis has once more stressed that banks must look deeply into their credit risk management practices. To remain competitive, it is increasingly important for banks not only to comply with regulations (e.g. Basel II) but also to perform risk-reward analysis at the portfolio and sub-portfolio levels in order to identify profitable transactions.

In view of this, the course is divided into two main parts: credit scoring for assessing counterparty default risk and credit risk portfolio modelling.

In the first part, we will take you through the steps of implementing a credit scoring model: from data pre-processing and model implementation to model validation and back-testing. We help you to develop a prototype scorecard based on real data.

The second part considers credit risk portfolio modelling. We illustrate the shortcomings of the Basel II capital formula, explain latest trends in capital allocation techniques and let you test the impact of best practice risk mitigation techniques.

The emphasis will be on practical implementation issues, and the course will be highly interactive (max. of 6 participants per course). Each lecture session is complemented by hands-on exercises with Excel / VBA in order to illustrate key technical points.

Agenda

Day 1

Session 1 (morning)

1. Review of the Basel II framework
   • Expected loss and risk costs
   • Credit risk parameters: PD, LGD and EAD
   • Basel II capital requirements for credit risk
     
     
2. Credit scoring for Basel II internal ratings based approach
   • Credit scoring techniques
   • PD calibration
   • Performance measures
     1. Receiver operating characteristic (ROC) curve
     2. Coefficient of concordance and Gini coefficient
   • Back-testing of PD estimates
   • Error estimation via bootstrapping
   • Practical problems in credit scoring
     1. Scarce default data
     2. Missing data and imputation methods
     3. Statistical outliers

   Session 2 (afternoon)

3. Case study: Developing a prototype scorecard based on real data
   • Univariate analysis
     1. Measures of discriminatory power
     2. Distributions and ROC curve
   • Multivariate analysis
     1. Selection of variables
     2. Logistic regression / discriminant analysis
   • Model validation
     1. Out-of-sample test
   • PD estimation

Day 2

Session 3 (morning)

Credit risk portfolio modelling
• Economic Capital vs Regulatory Capital
  1. Requirements for internal models
  2. Benefits of internal capital models
• Application areas for credit risk portfolio models
  1. Identification of concentration risk
  2. Limit settings
  3. Stress testing (Basel II requirement)
  4. Risk adjusted pricing (deal decisions)
  5. Support for hedging strategies
• Cutting-edge model development
  1. Structural models for credit risk portfolio modelling
  2. Capital allocation techniques
• Implementation challenges
  1. Stable allocation methods
  2. Treatment of structured products
  3. Cost / benefit issues

Session 4 (afternoon)

1. Case study: Credit risk portfolio modelling
   • Simulation of a portfolio loss distribution
   • Identification of portfolio risk drivers (systematic & idiosyncratic)
   • Application of risk mitigation techniques

Who should attend

Credit Risk Analysts, Risk Managers, Portfolio Managers and anyone who would like to gain a practical understanding of best practice credit risk modelling and implementation.

Prerequisites

Basic knowledge in MS Excel and a general interest in quantitative credit risk modelling. Some experience in VBA programming is beneficial.

Course fee

The course fee is USD 1,350 and includes the 2 day training course, lunch and course material (presentation and model implementations used for the case studies). Upon completion of the course each participant will receive a Certification of Attendance.

Group booking discounts:

• 2 delegates – 10% discount
• 3 or more delegates – 15% discount

Date & venue

The course can be conducted in-house or on our premises in Hong Kong, China. We will arrange a mutually convenient date.

How to apply

Please download the registration form (English) / registration form (Chinese), complete it, and fax it to +852 2544 9989.

Note: We can customise the course to your needs. You may be interested in our specialised one-day programme or having the course conducted in-house. Please contact us at info@d-fine.hk or call +852 3711 5800 for more information.

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