Topics are:
Introduction of default risk concept and credit risk-related securities.
Credit rankings (internal and external rating) and the role of credit rating agencies, credit migration.
Default prediction and credit scoring models.
Default dependencies.
Credit risk portfolio models (risk-adjusted performance, stress-testing portfolio losses).
Corporate bonds and yield spreads.
Default risk pricing models (structural models and reduced-form models).
Market default models: (CreditRisk+, Credit Metrics™, KMV model).
Credit derivatives and credit risks of derivatives.
Total contact hours: 36
Private study hours: 114
Total study hours: 150
Main assessment methods
Group Written Essay (2000 words) (40%)
Examination, 2 hour (60%)
Reassessment method;
100% Exam
Ashcroft, A.B and Schuermann, T (2008). Understanding the Securitization of Subprime Mortgage Credit. Federal Reserve Bank of New York Staff Reports, No. 318.
Cont, R. (Ed.) (2008). Frontiers in quantitative finance. New Jersey: John Wiley & Sons Inc de Servigny, A. and Renault, O.(2004) Measuring and Managing Credit Risk. New York: McGraw-Hill
Gregory, J. (2010). Counterparty Credit Risk: The New Challenge for Global Financial Markets.
Chichester: John Wiley & Sons
Malz, A.M. (2011). Financial Risk Management: Models, History, and Institutions. New Jersey: John Wiley & Sons
Stulz, R.M. (2002). Risk Management & Derivatives. Kentucky: Cengage Learning South-Western.
See the library reading list for this module (Canterbury)
The intended subject specific learning outcomes.
On successfully completing the module students will be able to:
- Learn about various securities with different types of credit risks, such as corporate debt, sovereign debt, credit derivatives, and structured products.
- Understand and implement various qualitative and quantitative methods for credit risk evaluation based on borrowers' data.
- Assess credit risk in a portfolio context.
- Critically discuss market-based credit risk models.
- Identify and discuss credit risk management techniques.
The intended generic learning outcomes.
On successfully completing the module students will be able to:
- Solve complex financial problems.
- Develop analytical skills necessary for the analysis of credit risk and identification of appropriate methods for its management.
- Plan work and study independently and make use of the relevant resources in a way which reflects best current practices and anticipated future practice.
- Develop their numeracy, quantitative and academic writing skills.
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