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Risk Management
Total risk management is the combination of all the elements of risk management into a consistent strategy...
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Training - Equity Market & Investment
Companies
Credit Portfolio Risk Management:
This advanced course focuses on credit portfolio risk
management techniques, examining several of the models and
approaches that have developed in the marketplace. It
considers how credit derivatives and other risk mitigation
methods can be used in the implementation of a credit
portfolio risk management programme. There is a discussion of
the relationship of credit risk to other risks faced by
financial institutions - market risk, operational risk,
liquidity risk etc.
The course examines these risks and the associated management
tools and techniques within the broader context of the Value
at Risk (VaR) approach to integrated risk management. VaR is
important because it has the support of the banking regulators
as an acceptable basis for the development of internal models
of risk analysis, the return on capital and capital adequacy.
Finally, the course addresses the policy, practice and process
issues that need to be part of an integrated risk management
programme within a financial institution.
Course Outline
DAY ONE
Overview and Concepts
* Market environment
* Deregulation
* Technology
* Risk management lessons
* Market risk
* Procter and Gamble
* Bank of International Settlements and the
* Qualifying for the
* Operational risk
* Barings and Allied Irish
* Credit risk
* Enron
* Vivendi
Risk Management and the role of the regulators Regulators
* Credit risk, capital and the
* The Federal Reserve system and the Bank of England
* The Bank of International Settlements (BIS)
* 1988 BIS Accord
* Capital rule making
* Internal Risk Management
* 1996 BIS Amendment
* BIS standards
* Internal models
* The new accords for 2004 implementation
* VaR models and integrated risk management
An Integrated View of Risk Management
* Definition of risk
* Market risk
* Credit risk
* Operational risk
* Group of 30 (G-30) Policy Recommendations
The Credit Cycle: Does it exist?
* Historical evidence
* Recent experiences
* The credit cycle and interest rates - interpretation
The Role of the Credit Rating Agencies
* Concepts
* Process
* Methodology
* The Issuer / The Issue
* Credit Enhancement Limitations
DAY TWO
Internal Rating Systems Internal Rating Systems
* Exposure, default probability and expected loss
* Default probabilities and recovery
* Policies, structure, process
* Role of agency ratings
* Credit ratings and Risk-Adjusted Return on Capital (RAROC)
Internal Risk Rating Systems
* Exposure, Probability of Default, and Expected Loss
* Default Probabilities and Recovery Rates
* Financial Assessment
* Qualitative Factors
* Industry Analysis
* Third party support
* Term, Structure and Collateral
* Ratings, Pricing, Return on Capital and Economic Capital
Measuring Risk: The Value-at-Risk (VaR) Approach
* Traditional approaches
* Notional amount
* Value of a basis point and duration (bond market)
* Value-at-Risk concept
* Definition of VaR
* Specified maximum loss
* Specified time period
* Specified probability
* Calculating VaR
* Variance-covariance approach
* Monte Carlo approach
* Historical simulation
* Advantages and disadvantages
Modern Portfolio Management Techniques - Overview
* Modern Portfolio Concepts
* The efficient frontier
* Risk and return - Single asset risk versus portfolio risk
Covariation, Correlation and Portfolio Risk
* Portfolio diversification
* Portfolio risk and return
* Marginal risk contribution of an individual asset
Credit Risk Management - VaR Approach
* Definition of Credit VaR
* Return distribution: credit vs. security
* Credit VaR and the capital charge
* Expected loss, unexpected loss and economic capital
An Options Theoretic Model of Credit Risk
* Conceptual building blocks
* The option approach to credit
* Equity - a call option the firm's asset value
* Estimating default risk
Practical Application: The KMV Model
* Definition of Expected Default Frequency (EDF)
* Addressing the non-normality issue
DAY THREE
A Credit Migration Model of Credit Risk: The CreditMetrics
Model
* The transition matrix
* Defining a credit rating system
* Establishing transition and default probability
distributions
* Determining a forward discount curve
* Determining the capital charge
An Actuarial Model of Credit Risk: CreditRisk
* Characteristics of the default probability distribution
* Advantages and disadvantages
Credit Portfolio Risk Management Techniques
* Secondary market trading- ISDA and standardized credit
documents
* Asset securitization
* Hedging
Credit Derivatives
* Total Return Swap
* Credit Swap
* Credit Spread Options
Operational Risk
* Definition of Operational Risk
* Significance of Operational Risk
* Measuring Operational Risk
* An Operational Risk Measurement Process
* Operational Risk VaR
Integrated Risk Management Revisited
* Interrelationships among Market risk, Credit risk,
Operational risk
* Credit risk and market risk
* Credit risk and operational risk
* Credit risk and liquidity risk
Internal Risk Management Organization
* Life cycle of risk management- From limits to RAROC
* Policy / Infrastructure/ Process Systems and technology
Credit Portfolio Risk Management and Risk-adjusted Return on
Capital
* Regulatory capital
* Economic capital
* Risk-adjusted return
* Risk-adjusted capital
* Risk-adjusted return on risk-adjust capital
* Looking forward
Course Fees
VAT to be included at the local rate, if applicable. Costs
shown are per delegate inclusive of refreshments, lunches and
seminar materials. Cost of accommodation is not included.
GBP 3000
Certificates of Participation
Certificates of participation are remitted to course
participants upon request. |
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