Fully revised and updatedCredit Risk ModellingHighlighting Best Practice And Current Developments20 – 23 November 2011 • K...
Course OverviewSince the mid-1990s, innovative and groundbreaking techniques havebeen developed in credit modelling and me...
Meet Your Expert Course Leader                   D                   Dr. John W. Dalle Molle is an independent financial   ...
Credit Risk Modelling                           20 – 23 November 2011 • Kempinski Hotel, Mall of the Emirates, Dubai, UAE ...
• Modelling default probabilities over multiple periods and maturity aging        • Reduced-form models based on credit sp...
Credit Risk Modelling20 – 23 November 2011 • Kempinski Hotel, Mall of the Emirates, Dubai, UAE     FIVE WAYS TO REGISTER  ...
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Bc4077 Credit Risk Web

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Credit Risk Modelling

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Bc4077 Credit Risk Web

  1. 1. Fully revised and updatedCredit Risk ModellingHighlighting Best Practice And Current Developments20 – 23 November 2011 • Kempinski Hotel, Mall of the Emirates, Dubai, UAE5 KEY LEARNING OBJECTIVES1. Explore the latest qualitative and quantitative credit measurement and modelling techniques related to individual credit facilities, consumer and retail credit, accounts receivables and collections, corporate lending, sovereign credits, securitised credit exposures and portfolios of credits, as they can be applied in the region2. Learn current credit risk modelling best practice for the assessment, measuring and modelling of credit risk factors including potential credit exposures, credit loss distributions, default frequencies, times to default, recovery rates, credit migrations, credit spreads and dependent default frequencies3. Understand best practice and the applicability of structural and reduced-form credit risk models, including an overview of common commercial/vendor credit portfolio analysis models4. Implement qualitative and quantitative credit modelling techniques, including credit-Value-at-Risk (CVaR), presented over the duration of the course using practical Excel-based Monte Carlo simulation exercises5. Acquire knowledge of credit loss protection techniques and various procedures for hedging different aspects of credit risk and follow the evolution of a global regulatory capital standard, i.e. Basel I, II and III Delegates should bring their laptop with Excel ORGANISED BY OFFICIAL REGIONAL preloaded. RECRUITMENT PARTNER www.twitter.com/iirmiddleeast www.facebook.com/iirmiddleeast www.youtube.com/iirmiddleeast www.iirme.com/creditrisk
  2. 2. Course OverviewSince the mid-1990s, innovative and groundbreaking techniques havebeen developed in credit modelling and measurement, which have ledto a modern approach to credit risk management. This course presentsthe fundamentals, objectives and procedures for assessing, evaluatingand modelling the creditworthiness of those exposed to different creditexposures, which affect credit providers and lenders. The course isdesigned to present a comprehensive discussion focused on current andbest practice in qualitative and quantitative credit risk modelling andmeasurement techniques, which have become a required part of the skillsets for both credit risk managers and analysts. The course also presentsthe best practice for modelling and measuring of credit loss distributions,individual and dependent default probabilities and intensities, creditmigration transition matrices, recovery rates and credit spreads.Extensions of Value-at-Risk (VaR) for assessing credit risks, i.e. CreditValue-at-Risk (CVaR) are also presented for standalone and portfoliocredit risk.The course will introduce you to qualitative credit risk assessmenttechniques, including credit scoring assessment procedures and scorecardmanagement techniques, in the context of the management of accountsreceivables, granting credit facilities and behavioural scoring of customeraccounts. Collection management procedures are presented for themanagement of credit exposures inherent to accounts receivables.Discussions and comparisons of structural and reduced-form creditrisk models are also presented, including an overview of commoncommercial/vendor credit portfolio analysis models. Credit loss protectiontechniques such as factoring of accounts receivables, letters of credit,credit insurance and securitisation, collateral and margining, and the useof covenants are detailed. Hedging techniques for counterparty creditrisk and methods for assessing credit concentration risk are also covered.Hedging applications of credit derivatives and credit derivative indicesare also presented.Basel II, as detailed in the latest June 2006 version of Basel II, presentedin terms of general principles of Basel II is a set of three mutuallyreinforcing pillars, i.e. Pillar I - minimum capital requirements, Pillar II -Supervisory review, and Pillar III - Market discipline. Also, Basel III, whichis the latest extension of the Basel accords, is discussed in terms of thenew rules included in the December 2010 Basel initiative for reformingglobal regulatory framework. Notes An understanding of the workings of the credit markets, basic knowledge of standard risk measurement models and intermediate- level courses in statistics and probability are prerequisites. Proficiency with Excel is also suggested. Delegates should bring their laptop with Excel preloaded. 971-4-3352437 971-4-3352438
  3. 3. Meet Your Expert Course Leader D Dr. John W. Dalle Molle is an independent financial markets consultant and trainer specialising in quantitative m credit, energy, market and operational risk management, c a analytics and modelling. Recently, he has been involved in model validation consulting projects with major Singaporean and Malaysian banks. He has presentedexecutive educational and professional training programs in Africa, theAmericas, Asia-Pacific Region, South Asia, the Middle East, the GCC andvarious European countries. His clients include several large financialinstitutions and central banks. In the past, he has also taught at a number ofrenowned universities in Asia, Europe, and the Americas. Dr. Dalle Molle hasalso made several professional presentations at international conferencesand exhibitions.Who Should Attend?Organisations and individuals seeking commercial and personal creditand credit lines, those making commercial and personal credit-grantingdecisions, lending and credit policy makers, commercial and in-house creditscorecard developers and users, credit risk managers and regulators; andspecifically:• Asset/Liability Managers• Back and Middle Office Personnel• Billing and Collection Managers• Central Bankers, Market Regulators and Bank Supervisors• Chief Risk Officers and Enterprise Risk Managers• Corporate Financial Analysts• Credit Portfolio Risk Managers• External and Internal Auditors• Loan Origination Officers and Underwriters• Project Finance Managers• Quantitative Credit Risk Analysts• Retail and Consumer Lending Managers• Securitisation and Structured Finance Market Practitioners• Treasury and Capital Markets Analysts and ManagersCourse MethodologyThe lecturing and course context are developed and presented through asystematic approach, starting from fundamentals of credit exposures toqualitative scoring methods, quantitative standalone and portfolio credit riskmodelling techniques and advanced credit risk modelling using structuresand securitised credit products.The modelling procedures are supplemented with the analysis of variouscase studies of systemic credit crisis examples over the last 30 yearsincluding the subprime crisis mid to late 2000s, the subsequent creditmarket freeze up of late 2008 and early 2009, and the European sovereigndebt of 2011.An extensive set of practical worked exhibits and examples, discussionsand case studies, computer simulations and various other exhibits are usedthroughout this course. You should be familiar with Microsoft Excel. • www.iirme.com/creditrisk Email: register@iirme.com
  4. 4. Credit Risk Modelling 20 – 23 November 2011 • Kempinski Hotel, Mall of the Emirates, Dubai, UAE Course Timings Registration will be at 07:30 on Day One. The course will commence at 08:00 and conclude at 14:30. There will be two refreshment breaks at approximately 10:00 and 12:30 and lunch will be served at the end of each day’s session.Course Outline Day Two Day One Credit Scores, Credit Scorecards, Credit Scoring Techniques, Scorecard Management Reports, Collections Management AndCredit Risk Exposures, Credit Events; Credit Ratings, And Credit Exposure DistributionsQualitative And Quantitative Credit Quality AssessmentTechniques Classic Credit Evaluation And Analysis Using Credit Scores And Scorecards And Consumer Credit Scoring MethodsCredit Risk, Credit Exposures And Credit Events • Credit evaluation using credit-scoring techniques• Credit, credit analysis, and credit decisions – historical perspective • Comparing credit scoring and credit rating• Credit risk categories, sources, and exposures for credit-sensitive products • Different classes of credit scores and credit scorecards - Exposures for different credit products • Scorecard development and the selection of scorecard characteristics - Exposures for corporate loans • Characteristics used in accounts receivables and collection scoring - Exposures from credit given to retail customers - Exposures inherent to a bank’s trading operations Exhibit: Scoring criteria – characteristics and attributed used in consumer - Exposures from derivatives positions scoring models• Credit events used in credit risk modelling – default, trigger and Exhibit: FICO and vantage credit scores – a comparison termination events• Effects of credit events on creditworthiness assessments Characteristics Of Credit Scoring Methods • Common statistical and judgmental indicators of credit worthiness Exhibit: Establishing good credit and the credit lending decision • Common predictors of credit quality for individuals/consumers Excel Exercise: Simulation of the time to default and default events • Distinguishing between risk classes in score-based rating systems • Extracting a credit rating system from credit scoring modelsCredit Quality Evaluation Using Credit Ratings • Judgmental and quantitative risk characteristics for consumer credit• Credit ratings methodologies – guidelines, criteria, information and scoring performance• Corporate credit ratings – historical perspective and an overview Exhibit: Credit scoring examples for credit approval, accounts receivables,• Credit ratings migrations, default probability forecasts and credit gradings fraud, recovery, and collections scoring• Granularity issues and other limitations for credit rating scales• Sovereign credit ratings – overview Scorecard Management Reports and Collections Management • Front and back-end scorecard management reports – An overview Exhibit: Comparing long and short-term debt rating and equity ratings • Accounts receivables, credit collection policies, and reducing counterparty Exhibit: Comparing Standard and Poor’s, Moody’s credit ratings – criteria risk and definitions • Collections scores, maintaining accounts, and measuring collections performanceCredit Quality Assessment Using Qualitative Credit Assessment • Delinquent payment management and collections management techniquesTechniques• Corporate/retail business failure prediction – an overview Exhibit: Developments and interpreting in front and back-end scorecard• Six Cs of credit: factors affecting the credit ratings management reports• CAMEL creditworthiness assessment system Excel Exercise: Examples of front and back-end scorecard management• Argenti’s A-scores for assessing creditworthiness reports• Piotroski F-score for assessing financial strength Credit Exposures and Credit Loss Distributions Exhibit: Key Risk Indicators (KRIs) and a credit risk rating framework for • Modelling loan exposures – current and potential exposures individual banks and banking industry structure • Credit loss structures – expected, unexpected and extreme losses • Common loss distribution models used in credit risk modellingRegression-Based Credit Ratings Models • Multivariate credit loss distributions for portfolios of dependent credits• Financial attributes affecting retail and corporate credit quality worthiness• Scoring criteria – financial ratios/variables for retail and corporate scoring Exhibit: Sources of Standalone Risk Factor Estimates for Credit Assets models Excel Exercise: Simulation modelling of potential credit loss distributions• Regression-based credit ratings models - Beaver’s financial distress model and predicting failure Day Three - Altman’s Z-score and Zeta score models using financial ratios - Ohlson’s Logit bankruptcy model using financial ratios Credit Exposure Factors, Default Likelihoods And Dependent - Horrigan’s bond ratings prediction model Defaults, Recovery Rates, Credit Spreads, Credit Rating Migration And Credit Portfolio Risk Exposures Exhibit: International survey of credit scoring models and associated explanatory variables Default Likelihood Forecasting And Dependent Defaults Exhibit: Using scoring models to distinguish between various credit rating • Default frequency models – assumptions and characteristics grades • Default intensity models, time to default and term structure models of defaults 971-4-3352437 971-4-3352438 register@iirme.com www.iirme.com/creditrisk
  5. 5. • Modelling default probabilities over multiple periods and maturity aging • Reduced-form models based on credit spreads and default likelihoods effects • Reduced-form models – strengths and limitations• Commonly used approaches to modelling dependent/conditional defaults Excel Exercise: Simulation modelling of reduced-form models using credit Exhibit: McKinsey’s Logit Default Prediction model spreads Excel Exercise: Simulation modelling of multiple-period defaults and aging effects Commercial/Vendor Credit Portfolio Risk Models Excel Exercise: Simulation modelling of dependent default events • Key risk factors affecting parameter specifications for credit portfolio risk • Best practice for commercial credit portfolio risk platforms, including:Recovery Rate Modelling - RiskMetrics CreditMetrics® portfolio credit risk model• Factors affecting recovery rates - Credit Suisse Financial Products (CSFP) CreditRisk+• Modelling recovery rates - KMV/Moody’s Credit Portfolio Manager™• Link between default frequencies and recovery rates - McKinsey’s Credit Portfolio View Excel Exercise: Simulation modelling of loss-given-default with random Exhibit: Commercial credit portfolio models – structural comparisons recoveries Exhibit: Comparison of commercial credit portfolio models - strengths and limitationsCredit Rating Migration Probabilities And Transition Matrices Exhibit: Default correlation/dependency in commercial credit portfolio• Credit ratings migrations – properties of credit quality downgrades and models upgrades• Forecasting rating transition frequencies and rating transitions correlations Credit Loss Protection Techniques, Hedging Counterparty Credit• Limitations of historical estimation of credit migration probabilities Risk, Assessing Credit Concentration Risk, Hedging Credit Risk Using Credit Derivatives And Credit Derivatives Indices, And Credit Fraud Excel Exercise: Simulating credit rating transitions using Markov chains Prevention with multiple credit categories and including a default absorbing state • Common credit loss protection techniques - bills discounting, factoring of accounts receivables, financial guaranties, Letters of Credit (LoC), creditCredit Spreads Applications In Credit Risk Modelling insurance, securitisation, collateral and margining and the use of covenants• Economic factors affecting credit spreads and the expected cost of default • Credit concentration risk – sector and single-name concentration risk and• Rating-based models for credit spread the Herfindahl-Hirschman index of concentration• Credit curves and modelling of the term structures of credit spreads • Counterparty credit risk hedging using Credit Valuation Adjustment (CVA) as a credit adjustment on a positive derivative exposure Excel Exercise: Simulation modelling of credit spreads • Credit Default Swaps (CDSs), credit derivatives indices and other credit derivatives – default protection and hedging credit riskStandalone And Portfolio Credit Risk Assessment Using Credit Value-at • Customer identity verification and preventing fraud in a credit scoring andRisk (CVaR) rating• Credit VaR model types – overview and characteristics - Default Mode models (DM) Basel I, II And III Accords –Evolution Of A Global Regulatory Capital - Mark-to-Market (MTM) models Standard• Standalone CVaR – assessing expected and unexpected losses for a risky • Regulatory capital and the Basel I and II accords – overview credit • Basel II – Pillar I - minimum capital requirements• Portfolio CVaR – assessing expected and unexpected losses for portfolios • Basel II – Pillar I modelling approaches – I: standardised approach of credits • Basel II Modelling approaches – II: foundation internal rating based approach Excel Exercise: Simulation modelling of portfolio credit risk losses with • Basel II Modelling approaches – III: advanced internal rating-based random default arrivals, recovery rates, and credit exposures approach Excel Exercise: Putting it all together – developing Monte Carlo simulation • Basel II Pillar II: supervisory review – overview models for standalone and portfolio credit VaR forecasts • Basel II Pillar III: market discipline – overview • Basel III – December 2010 initiative for reforming the global regulatory Day Four frameworkReduced Form And Structural Credit Models, Commercial Credit Exhibit: Comparing expected and unexpected credit losses, economic riskPortfolio Risk Models, Credit Loss Protection Techniques, capital, and regulatory capitalHedging Techniques For Credit Risk Exposures, and Basel I, IIAnd III Accords The following short case studies related to systemic credit crises since the 1980s will be discussed during the programStructural Credit Risk Models And Forecasting Default Times• Merton (1974) Structural Model – option-theoretic default forecasting Case study – LDC crisis of the early 1980s and the brady bond model restructuring innovation - First generation structural-form models and forecasting default at Case study – US saving and loan crisis of the early 1980s maturity - Second-generation structural-form models and forecasting default at Case study – Leveraged Collateralised Mortgage Obligations (CMOs) crisis, any time between issuance and maturity US bond market sell-off of 1994 and mutual funds losses• Structural credit risk models – strengths and limitations Case study – Global and national implications and consequences of the US Excel Exercise: Simulation modelling of time to default using Merton subprime crisis of the late 2000s - implications of prolonged US recovery (1974) model and the “New Normal” for global markets Case study – Systemic sovereign debt crises in European Union arising inReduced-Form Credit Risk Models And Forecasting Times To Default the aftermath of the credit crunch and liquidity freeze of the late 2000s• Reduced form or intensity-based models of credit risk measurement• Reduced-form models and exogenous factors underlying time to default 971-4-3352437 971-4-3352438 register@iirme.com www.iirme.com/creditrisk
  6. 6. Credit Risk Modelling20 – 23 November 2011 • Kempinski Hotel, Mall of the Emirates, Dubai, UAE FIVE WAYS TO REGISTER 971-4-3352437 IIR Holdings Ltd. P.O Box 21743 Dubai, UAE 971-4-3352438 GCS/IIR Holdings Ltd. P.O Box 13977 register@iirme.com Muharraq Kingdom of Bahrain www.iirme.com/creditrisk DISCOUNTS AVAILABLE FOR 2 OR MORE PEOPLE CALL – 971-4-3352483 E-MAIL – a.watts@iirme.com WEB BC4077 Course Fee Before Course Fee Before Event Final Fee 11 September 2011 9 October 2011 Credit Risk Modelling US$ 3,950 US$ 4,450 US$ 4,750 20 – 23 November 2011 Interested in running this course in-house?Course fees include documentation, luncheon and refreshments. Delegates who attend all sessions will receive a Certificate of Attendance. Please call the Customised Training Solutions Team on 971-4-3352439 or CTS@iirme.comDELEGATE DETAILS All registrations are subject to our terms and conditions which Name: .............................................................................................................................................................................................................. are available at www.iirme.com/terms. Please read them as they include important information. By submitting your Job Title: ......................................................................................................... Email: ..................................................................................... registration you agree to be bound by the terms and Tel: ..................................................... Fax: .................................................... Mobile: .................................................................................. conditions in full. Payments Name: .............................................................................................................................................................................................................. A confirmation letter and invoice will be sent upon receipt of your Job Title: ......................................................................................................... Email: ..................................................................................... registration. Please note that full payment must be received prior to the event. Only those delegates whose fees have been paid Tel: ..................................................... Fax: .................................................... Mobile: .................................................................................. in full will be admitted to the event. You can pay by company cheques or bankers draft in Dirhams or US$. Please note that all US$ cheques and drafts should be drawn on a New York bank Name: .............................................................................................................................................................................................................. and an extra amount of US$ 6 per payment should be added to cover bank clearing charges. In any event payment must be Job Title: ......................................................................................................... Email: ..................................................................................... received not later than 48 hours before the Event. Entry to the Event may be refused if payment in full is not received. Tel: ..................................................... Fax: .................................................... Mobile: .................................................................................. 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Registration fees for registrations cancelled 7 days or less beforeCompany: ............................................................................................................................................................................................................ the Event must be paid in full. Substitutions are welcome at any time.Address: ................................................................................................................................................................................................................Postcode: ................................................................................. Country: ........................................................................................................... Avoid Visa Delays - Book NowTel: .............................................................................................. Fax: ................................................................................................................. Delegates requiring visas should contact the hotel they wish to stay at directly, as soon as possible.No. of employees on your site:. Visas for non-GCC nationals may take several weeks to process.1000+ 500-999 250-499 50-249 0-49 YES, I would like to receive information about future events & services via e-mail ................................................................. All registrations are subject to acceptance by IIR which will beNature of your companys business: .......................................... confirmed to you in writing. Due to unforeseen circumstances, the programme may change and IIR reserves the right to alterTo assist us with future correspondence, please supply the following details: the venue and/or speakers. Event Venue:Name of the Department Head: ..................................................................................................................................................................... Kempinski Hotel, Mall of the Emirates, Dubai, UAEDepartment: ........................................................... Mobile: .......................................... Email: ....................................................................... Tel: 971-4-3410000 Accommodation DetailsTraining Manager: ............................................................................................................................................................................................. We highly recommend you secure your room reservation at theDepartment: ........................................................... Mobile: .......................................... 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