Credit Risk Management
Content
Participants will gain a detailed understanding of credit-related data, and will then consider a broad-class of default intensity models and how they relate to popular industry models such as those programmed into Bloomberg.
Case study analysis and discussion provides an understanding of the limitations of credit risk modelling and how to circumvent them. Such awareness is vital, an illustration being that the models currently used by practitioners do not take liquidity into account, despite credit risk markets being significantly affected by liquidity considerations.
Key topics:
Understanding credit related data
-
historical default experience
-
historical recovery experience
- historical experience on correlated defaults
Understanding credit risk models and their applications in practise
- structural models of credit risk (Merton, Leland, Collin-Dufresne et al)
- applications of structural models of credit risk to default prediction and hedging; the KMV model
- default-intensity models (Iben-Litterman, Duffie-Singleton, etc.)
- application of default intensity models to credit default swaps and credit spread options
- pricing of sovereign credit derivatives
- correlation modelling and applications
- basket default products: index tranches and CDOs
Understanding the limitations of credit risk modelling
- institutional features and liquidity issues relevant to credit derivatives.
Typical schedule
A typical daily schedule looks like this:
- 08.30 Coffee
- 09.00 Lecture One
- 10.30 Break, followed by completion of Lecture One
- 12.30 Lunch
- 13.30 Case study group meetings, followed by break
- 15.30 Case study group meetings, followed by break
- 17.30 Lecture Two
- 19.00 Dinner
- 20.00 Guest speaker or case study group meetings
The programme is intensive and days are full in order to provide full immersion in the topics taught and to maximise participant learning within the timeframe.
