Advanced Credit Risk Professional Certificate
A comprehensive survey of credit risk modeling, valuation and credit risk management techniques. Develop models for assessing the value and risk of portfolio credit default swaps, tranche credit index products and various types of collateralized debt obligations.
CPE Credits: 35
Prerequisite knowledge:
- Intermediate MS Excel skills
- Basic fixed income arithmetic
- Elementary differential calculus
- Basic probability and statistics
This Advanced Professional Certificate comprises the following NYIF courses:
- Valuation and Credit Risk Management (Days 1 - 3)
- Structured Credit Modeling (Days 4 - 5)
Experience NYIF Virtual:
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To make it even easier to learn, you can finance your program through Affirm.
Loans offered through Affirm are available in the U.S. and Canada.
Module 1: Introduction
- What is credit risk?
- A look at the data: defaults, recoveries, spreads and cycles
- Conceptual approaches to credit risk modeling: actuarial (objective) models vs 'risk-neutral' or valuation models
Module 2: Single Issuer Credit Risk: Credit Transition Models
- Credit transition models
- Commercial implementations: Credit Metrics and the rating agencies
Module 3: Single Issuer Credit Risk: Structural Models
- Debt and equity as options on the assets of the firm
- Probability of default (PD) and loss given default (LGD)
- Expected credit loss is the value of a put option
- Credit spreads in structural models
- Bond risk measures in structural models
- Commercial implementations: Moody's Analytics (MKMV) and Credit Grades
- Rational ('strategic') default in structural models: subprime mortgages and securitization
Module 1: Single Issuer Credit Risk: Reduced Form Models
- Extracting (risk-neutral) default probabilities form bond prices
- Hazard rate models of default
- Credit spreads in reduced form models
- Bond risk measures in reduced form models
- A simple default time simulation for a stochastic hazard rate
Module 2: Single Issuer Credit Derivatives
- Total return swaps
- Asset swaps
- Credit default swaps
- Digital CDS
- Simple trader arithmetic for quick thinking on the trading desk
Module 1: Portfolio Credit Risk: Correlated Defaults
- Correlated firm value (structural models)
- Correlated intensities (reduced form models)
- Factor models
- Copula functions
Module 2: Value at Risk for Credit Portfolios
- The larger homogeneous portfolio (LHP) approximation
- Transition VaR model: Credit Risk +
- Credit VaR by Monte Carlo: Copula Models and Factor Models
Module 3: Capital Allocation for Credit Risk
- VaR based risk capital
- Option theoretic approach to risk capital
- Regulatory capital
- RAROC based capital budgeting
Module 1: Review of Fundamentals
- Credit modeling frameworks
- Default dependence ('correlation')
- Copula functions
- Mechanics of credit default swap (CDS) contracts
Module 2: Basket Default Swaps
- Mechanics of basket trades
- First-to-default valuation and implied default correlation
- Higher order default valuation
Module 3: Collateralized Debt Obligations
- Mechanics of CDO trades: Cash-flow and synthetic structures
- Tranche valuation and implied default correlation
- Applying the large homogeneous portfolio (LHP) approximation
- Implementation of the Gaussian Copula
Module 1: CDS Portfolio Indices
- Mechanics of the standard indices
- Index valuation
- ABS, CMBS and Loan CDS Indices
Module 2: CDS Index Tranches
- Implied default correlation
- Compound correlation
- Base correlation
- Correlation skew
- Term structure effects
Module 3: CDO Risk Management
- Risks: Idiosyncratic vs systematic
- The LH+ model
- Tranche hedging
Module 4: Portfolio Credit Products and Trading Strategies
- Constant proportional portfolio insurance (CPPI)
- Credit CPPI
- Constant proportion debt obligations (CPDO)
- CDO-Squared
- Credit default swaptions
- Leveraged super-senior tranches
- Recovery swaps and locks
- Capital structure arbitrage
Module 5: Desk Ready Skills Knowledge Check