Credit Risk Analysis Workshop

CORE COMPETENCIES: Credit Risk Track

Excel Focused Technical Skill Development

2 DAY COURSE

Qualifies for CPD and 14 CPE Credits

INTRODUCTION

Without understanding differences in creditor quality, lenders may have difficulty in creating loan portfolios that conform to their risk preferences. To distinguish between creditors and credit quality and to price credits correctly, each potential credit needs to be analyzed rigorously, using both quantitative and qualitative analysis, to predict the likelihood of repayment. The purpose of this workshop is to analyze credit risk factors and how these risk factors can be measured, controlled, and reduced in financial institutions. The course analyzes not only credit assessment and credit risks, but also the relationship between credit risk and credit pricing. This intensive and highly interactive course includes the latest practical and theoretical developments in credit risk analysis and management and offers practical case studies, group activities, and interactive Excel exercises to reinforce both the various concepts and the relationship among these concepts.

Who should attend?

This intensive and interactive training course is designed for practitioners, with limited knowledge of credit and credit risk management. As its primary objective, the course aims to provide an understanding of corporate and retail credit risk.

What will you get out of this course?

• Gain understanding in evaluating a company’s performance and capital structure using both qualitative and quantitative frameworks and tools
• Learn how ratings, indicators, and bond and CDS spreads price risk
• The market view on a credit
• Forecast future corporate financial and credit performance and repayment
• Understand how to incorporate credit risk Value-at-Risk calculations
• Practical demonstrations of the above will be provided throughout the workshop through interactive Excel spreadsheets that the delegates will be able to use after the course

COURSE OVERVIEW AND OUTLINE

For this intensive and highly interactive course, all delegates are strongly recommended to attend the workshop with a laptop computer loaded with Microsoft Excel.

The nature of credit risk

• Drivers and measurement of credit risk
• Credit risk in the trading book
• INTERACTIVE GROUP SESSION: Market and credit risk events

Loan and debt products for non-retail use

• Loans and overdrafts, trade, project and mezzanine finance
• Mortgages, prepayment, default and extension risk
• Government, municipal, and corporate bonds
• INTERACTIVE GROUP SESSION: Modeling the cash flows of fixed income and structured products

Principles of corporate credit assessment

• Seasonal and cyclical credit needs
• Credit quality indicators
• INTERACTIVE GROUP SESSION: Analyzing historical financial performance

Assessing corporate credit risk

• Conditions, Capacity and Capital – historical financial information, forecasting financial information
• Collateral and Character – the role of collateral in the credit decision, non-financial information
• INTERACTIVE GROUP SESSION: Forecasting future financial performance and debt repayment capacity

The use of credit ratings

• Rating agencies and the nature of corporate credit ratings
• Market based credit risk models – option models and reduced models
• Internal credit ratings models
• INTERACTIVE GROUP SESSION: Inferring credit risk ratings from the market

Credit events, defaults, and bankruptcy proceedings

• Overview of credit events, including default
• Bankruptcy proceedings and recovery
• Credit quality deterioration, transition matrixes
• INTERACTIVE GROUP SESSION: Calculating the risk of default using market information
• INTERACTIVE GROUP SESSION: Calculating transition matrix

Valuing loans and managing credit portfolio risk

• Mark-to-market vs. mark-to-model
• Using and valuing credit derivatives to reduce credit risk
• Reducing loan portfolio risk using swaps, insurance, and securitization
• INTERACTIVE GROUP SESSION: Analyzing credit quality management using swaps and insurance

Measuring the credit risk of the bank using VaR

• The VaR – parameters in VaR, marginal VaR, incremental VaR, and component VaR
• Approaches to measuring credit VaR – historical approach, model-building or variance-covariance
• INTERACTIVE GROUP SESSION: Estimating, interpreting, using credit VaR alternative approaches