Credit Portfolio Risk Management
This course addresses the significant developments in recent years that have been brought to bear on the management of credit risk borne by financial services firms, particularly banks. Factors such as deregulation and technology have increased the magnitude and complexity of the credit risks faced by major players in the credit markets, and raised questions about the adequacy of the capital held by these firms as a buffer against credit loss.
Prompted by the concerns of regulators, shareholders and customers, a growing number of financial firms have begun to employ the concepts and techniques of modern portfolio theory to the management of credit portfolios. This credit portfolio management methodology takes into account the effects of correlation and diversification to analyze and manage a credit portfolio and contribute to effective, if not quite optimum, use of the firm’s capital. The course focuses on these portfolio management techniques and examines several of the models and techniques embodying these concepts that have developed in the marketplace. It also considers how credit derivatives and other risk mitigation techniques are used in the implementation of a credit portfolio risk management program.