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FINANCIAL MARKET COURSES

Credit Risk Measurement – An Introduction

This course explains the various measures that enable banks and other institutions to estimate or measure the level of credit risk to which they are exposed. These measures include absolute currency amounts for products such as term loans and estimated currency amounts for products where credit risk varies due to market price/rate movements, in addition to risk-weighted assets (RWAs) and measures of expected loss (EL). The course also outlines some of the limitations and complexities associated with these credit risk measures.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Describe the range of measures that banks

    Use to estimate credit risk

    Outline some of the issues surrounding these measures

  • COURSE OUTLINE

    Topic 1: Credit Risk Measures

    Types of Credit Risk Measure

    Credit Exposure

    o Credit Limit

    o Utilization

    o Undrawn Committed Limit

    o Overdraft Example

    Exposure Measurement Methodologies

    o FX Forwards Example

    Gross Exposure vs. Net Exposure

    o Netting Example

    Expected Loss (EL)

    o Probability of Default (PD)

    o Exposure at Default (EAD)

    o Loss Given Default (LGD)

    o Calculating EL

    o EL vs. UL

    Risk-Weighted Assets (RWAs)

    o Calculating RWAs

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    40 Minutes

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