Credit Risk

Credit risk is a critical concern for lenders, financial institutions, and businesses, as it represents the risk of a borrower failing to repay a loan, resulting in the lender losing the principal or the interest associated with it. This training course provides a comprehensive overview of credit risk, exploring its various forms and origins. Participants will learn how to measure and manage credit risk effectively, understand the impact of credit risk on banks' capital adequacy ratios, and discover techniques to mitigate this risk. This course is essential for anyone involved in lending, credit analysis, or financial risk management.

The course begins with an overview of credit risk, explaining its significance and the potential consequences for lenders and borrowers. Participants will then delve into the credit risk lifecycle, gaining insights into the different stages where credit risk can emerge. The course covers the various types of credit risk, including borrower default risk, counterparty risk, and issuer risk.

Participants will learn methods for measuring and managing credit risk, including statistical and financial techniques. The course also examines the role of the Basel Accords in regulating credit risk and ensuring financial stability. Additionally, participants will explore the estimation of default probabilities from credit spreads and the application of these estimates in credit risk assessment.

The final part of the course focuses on credit risk mitigation strategies, such as collateral management, credit derivatives, and portfolio diversification. Practical case studies and hands-on exercises will help participants apply these concepts in real-world scenarios.

By the end of this course, participants will be able to:

• Understand the fundamentals of credit risk and its significance in the financial industry.
• Identify and analyze different types of credit risk, including borrower default risk, counterparty risk, and issuer risk.
• Measure credit risk using various statistical and financial techniques.
• Implement effective credit risk management practices to minimize potential losses.
• Comprehend the impact of credit risk on banks' capital adequacy ratios and the importance of the Basel Accords in regulating credit risk.
• Estimate default probabilities from credit spreads and utilize these estimates in credit risk assessment.
• Apply credit risk mitigation strategies, such as collateral management, credit derivatives, and portfolio diversification, to reduce exposure to credit risk.

This training course provides a thorough understanding of credit risk, equipping participants with the knowledge and skills needed to manage and mitigate credit risk effectively in their organizations.

To provide the audience with an understanding of credit risk, its types and lifecycle events, the overall description of credit risk measurement, management, and mitigation, and how credit risk is included in the current landscape of bank regulatory capital requirements.

• Credit Risk: an Overview (0.5 hours)
• Credit Risk Lifecycle (0.5 hours)
• Credit Risk Types (0.5 hours)
• Credit Risk Measurement & Management (0.5 hours)
• Credit Risk and the Basel Accords (0.5 hours)
• Estimating Default Probabilities From Credit Spreads (0.5 hours)
• Credit Risk Mitigation (0.5 hours)

Total: 3 hours