Credit Risk Modeling

MATERI  1. 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

2. 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

3. Credit Rating I

• 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

4. Risk Modeling and Measurement

• Introduction
• Determining loss due to default/downgrade
• Estimating PD / LGD / EAD
• LossCalc
• Amortization vs diffusion effect

5. 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)

6. Portfolio Model For Credit Risk

• Introduction,
• Measure of Portfolio Risk,
• Concentration and Correlation, Credit Loss Distribution,
• Credit VaR
  • Covariance redit portfolio model using beta distribution,
  • Basel II portfolio model
  • Coherent risk measure
  • Expected shortfall
  • Stress test

7. JP Morgan Credit Metrics

• Introduction
• Credit Rating Transition Matrix
• Spread Curve
• Present Value Revaluation
• Incorporating Default Correlation
• Usage of Monte Carlo Simulation

8. Credit Suisse Credit Risk

• Introduction
• Credit Risk Framework
• Building Block in CreditRisk
• Credit Risk Loss Distribution

9. 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

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