Registered

participants
will be recieving
complimentary copy
of the pre-workshop
reading material

IMPORTANT: Participants are required

to bring their laptops along.

CREDIT RISK ASSESSMENT,

MODELLING AND MANAGEMENT
Clive Corcoran

FCA Registered Investment Adviser,

Financial trainer and Author

20 - 21 November, 2014
Clive Corcoran is an FCA registered investment adviser, financial trainer and author
having conducted workshops on a variety of topics including risk management, asset
allocation techniques and trading strategies especially with regard to the FX market.
The clients for whom he has recently provided in house training have included the Saudi
Investment Bank in Riyadh, Central Bank of North Africa, a sovereign wealth fund in the
Gulf, an asset management company in Beijing, a global banking group domiciled in
the Netherlands, Central Bank of South America, a public/private partnership in project
finance based in Washington D.C. and the European Investment Bank (EIB).
As an author, he has written several titles on finance and investment management. His
most recent book entitled Systemic Liquidity Risk and Bipolar Markets (Wiley Finance,
February 2013) looks at new challenges facing asset allocators and risk managers in the
post financial crisis environment. An earlier book entitled Long/Short Market Dynamics:
Trading Strategies for Todays Markets (Wiley, 2007) dealt primarily with alternative
asset management strategies.
He was also commissioned by the London based Chartered Institute for Securities
and Investment (CISI), to write three textbooks, Portfolio Construction Theory, Wealth
Management and Securities (Level 4) for those seeking the Investment Advice Diploma
and Financial Markets.
He has also been a regular analyst/contributor to CNBC Europe and other broadcast
outlets, a columnist for several print and online publications, and has been a featured
speaker at international investment and trading expos.
Clive has been working with some of the Worlds largest training organizations including
Euromoney, Fleming Gulf, Informa Telecom, etc.

Karachi Marriott Hotel

9:00 am to 5:00 pm

COURSE OBJECTIVES

The course is designed to give delegates

a comprehensive overview of the key
concepts and methodologies in
understanding the drivers of credit risk,
modelling tools used for the
measurement of credit risk, and current
best practice in credit risk management
techniques.

CREDIT RISK ASSESSMENT,

MODELLING AND MANAGEMENT
Agenda Day ONE
SESSION ONE

SESSION THREE

Fundamentals of Credit Risk

The key macro and micro financial concepts behind, and drivers of,
credit risk
Credit risk, liquidity risk, market risk, systemic risk how effectively
can they be separated into discrete categories?
Measurement of credit risk and adverse outcomes
Assessing credit risk and default probability of loan portfolios
Key determinants for managing credit risk:
o Probability of default (PD)
o Exposure at default (EAD)
o Loss given default (LGD)
Credit migration and transition matrices
Fundamental analysis of financial statements, key ratios, qualitative
characteristics of the balance sheet
Off balance sheet and contingent credit risk
Market-based approaches, bond spreads, swap rates
Counter party credit risk
Credit scoring, credit risk modelling, risk profiling and assessing
creditworthiness

Counter-Party Credit Risk

Examine the various facets of credit risk which hinge on losses sustained
from failure of an obligor to honour contractual obligations
Distinguish the separate components of credit risk:
o Probability of default by obligor how reliably can it be estimated?
o Probability of downgrade or widening credit spreads of counter-party
o Recovery rate what percentage of obligation can be recovered after
default?
o Credit exposure estimating loss magnitude in relation to capital buffers
Determination of a credit default event, ISDA master agreement,
Credit Support Annex
Liquidity of market for CDS, scrutiny from regulators
Understand the concepts of credit rating and scoring and critical examination
of how useful such techniques are for determining actual risk of default?
New components in the Basel III framework for addressing issues related to
default and deterioration of the credit quality of counter parties
Credit Valuation Adjustment (CVA) and Debt Valuation Adjustment (DVA)
Explanation of key concepts of Expected Exposure (EE), EPE, Wrong Way
Risk (WWR)

CASE STUDY:
- Excel model for credit transition matrix and estimating Credit Value At Risk
from ratings migration

Case Study
- Bypassing the credit risk from OTC transactions through Central Party
Clearing (CCP)
- Novation removes the risk of non-performance from originators of trades
- Netting, collateralization issues and preferential treatment of CCP exposure
in Basel III
- Understanding the loss waterfall in a CCP
- Understanding of the margin protocols of CPPs and SEFs

Coffee & Networking Break

SESSION TWO
Credit Ratings Methodologies and Application
Review of ratings classifications systems of the major Credit Ratings Agencies
(CRAs)
The principal credit ratings agencies Moodys, Standard & Poors, Fitch
Services provided to subscribers of CRAs publications
The CAMEL model for banks and other financial firms and usage by banking
supervisors
Overview of the ratings methodologies issuer analysis, historical data,
business cycles
Commercial paper ratings
Sovereign ratings approach to developed markets and emerging markets
Conflicts of interest - representing credit issuers but designed to protect
credit purchasers
Why did the CRAs perform so poorly in the rating of CDOs and other
derivatives?
Ratings migration matrices use by banks in determining credit risk VaR
Impact of upgrades/downgrades on market perceptions of creditworthiness
Dodd-Frank Act de-emphasis on reliance by financial firms on
external ratings
Case Study:
- Examination of Egan Jones rating methodology which is in public domain
- How do its ratings methodologies and classification outcomes compare to Big 3?
Lunch Break

Coffee & Networking Break

SESSION FOUR
Measuring Credit Risk and Techniques for Credit Risk Modelling
Credit Metrics, credit scoring and credit rating systems
Quantitative modelling of credit risk using stochastic processes
Estimating probability of default KMV, distance to default techniques
Explain how debt and equity can be understood as options on the firm
Techniques for modeling default risk of CDOs, CMOs and other
structured vehicles
Lessons from SIVs and other off balance sheet financing on credit
risk management
Adapting VaR measures to include a metric for default value at risk
Credit Migration matrices - Moodys historical data, scaling over different
time frames
Integrating Credit VaR and Market VaR
Swap rates and credit spreads as a tool for estimating market assessment
of credit risk
Portfolio CVaR joint probabilities of default copula techniques
Techniques for estimating LGD and recovery rates
Exercise
- Excel tool for calculating credit default risk using the Merton Distance to
Default model

CREDIT RISK ASSESSMENT,

MODELLING AND MANAGEMENT
Agenda Day TWO
SESSION ONE
Sovereign Credit Risk
Principal factors used to determine creditworthiness of a sovereign
Issues relating to sovereign bonds under different jurisdictional frameworks
Deterioration in public balance sheets high debt/GDP ratios
Linkage between sovereign risk and risks to local banking system
Underlying macro-economic drivers of ratings - global imbalances,
surplus/deficit nations
Role of sovereign CDS market is it still vital or declining?
Sovereign debt re-structuring- bail outs/bail-ins
Protection to different stakeholders seniority of claims, preferred status
of central banks
Collective Action Clauses (CACs)
Sovereign domino thesis and financial contagion
Case Study
- The re-structuring/default of Greek government debts in 2012
- Impact on the sovereign CDS market
- Jurisdictional issues - Greek law bonds versus English law bonds
Coffee & Networking Break
SESSION TWO
Interpreting Credit Related Market Data
Monitoring government bond yields and changes to the term structure of
interest rates for US dollar, euro, sterling, and yen
Theories of the yield curve
o Liquidity premium
o Safe haven premium
Credit spreads for investment grade and high yield instruments relative to
government issue and inter-bank rates
o Over Treasuries, over bunds, over gilts
o Over LIBOR, OIS, EONIA
Option Adjusted Spreads (OAS)
Swap spreads LIBOR/OIS, EURIBOR/EONIA
Credit Default Swap (CDS) rates estimation of probabilities of default
Measuring market sentiment investor confidence indices, contrarian
indicators
Exercise
- Calculation and interpretation of credit spreads and swap spreads and
comparison to CDS rates
- Use of Excel workbook to calculate CDS spreads from PD and vice versa
Lunch Break

SESSION THREE
Credit Assessment and Financial Ratio Analysis
Financial Statement Analysis
Credit Assessment based on detailed analysis of corporate balance sheets,
income statements and cash flow statements
Impact of Corporate actions - capitalization or consolidation, rights issues
Financial ratios
Profitability, Liquidity, Asset turnover, Gearing
Liquidity ratios, pay-out ratios, financial stability ratios, operational gearing
Dividend policy, Return on equity, Return on Capital Employed ROCE
Earnings per share, P/E Ratios (historic and prospective)
Dividend yield, Dividend/interest cover, Price/book
Ratio based Methods for Determining Credit Stress and Defaults
Altmans Z score model, KMV model, Moodys Analytics,
Ohlson financial distress model, Risk Metrics, McKinsey Credit Portfolio View
Case Study
- Excel model showing the application of Altmans Z score model for default
prediction
Coffee & Networking Break
SESSION FOUR
Managing Credit Risk And Regulatory Capital Charges for Credit Risk
Mechanics of credit derivatives and how they can be used for hedging
portfolio credit risk
Single name credit derivatives (unfunded and funded structures)
Total return swaps, n-th to default Credit Derivatives
Basket and Tranche CDS, index based CDS
Impact on regulatory capital from use of, and exposure to, credit derivatives
ISDA documentation and legal framework for IR swaps, Credit Support
Annex (CSA)
Regulatory capital under Basel II and 2.5
New approaches to capital charges for credit risk under Basel III
Stress testing how to conduct stress testing with Monte Carlo Simulations
Calculating capital charges for credit exposures
o Standardized approach
o Foundation internal ratings based approach
o Advanced internal ratings based approach
Case Study And Concluding Discussion
- Excel modelling tool for conducting stress testing using standard VaR,
Expected Shortfall, and Random scenario generation (Monte Carlo Simulation)
- Will new techniques for credit risk modelling and provisions for alleviating
counter party credit risk prove effective in avoiding a similar crisis to that seen
in 2008?

CREDIT RISK ASSESSMENT,

MODELLING AND MANAGEMENT

TARGET AUDIENCE
The course is suitable for those engaged in credit
risk management and supervision within central
banks, treasury and risk management functions
in commercial banks, and asset managers
including those within hedge funds, pension
funds, securities analysts, private client wealth
managers, and sovereign wealth funds. In general
terms, the course will be valuable for all of those
who wish to expand their knowledge of
innovations in modelling credit risk, techniques
for credit risk management and the impact of
Basel III on capital markets.
The focus in the workshop will be on using
analytical tools exemplified in Excel - and there
will be abundant use of statistical/quantitative
techniques applied to credit risk analysis.
STRUCTURE OF THE COURSE
The course covers two days of lectures and the
focus will be on specific examples and case
studies. There will also be opportunities for
collective exercises and analytics using
quantitative techniques which will have been
explained.
For each day of the course there will be four
separate ninety minute sessions with coffee
breaks in the morning and afternoon with a
lunch break in the middle.
WHY THIS COURSE IS TIMELY
Treatment of credit risk is of a different order of
magnitude from that seen before the global
financial crisis. Prior to 2008 it was considered
almost inconceivable that major investment
banks and global insurers could default and
create a systemic credit and liquidity crisis. When
Lehman Brothers failed it had about 1.5 million
derivatives contracts with 8000 counter parties.
Since the crisis there has been a pervasive rethinking of most aspects of legacy risk
management techniques. In regard to credit risk,
financial regulators and the Basel Committee on
Banking Supervision have placed a great
emphasis on the need for innovative and more
robust methods of modelling financial stress and
the kinds of credit market deterioration that was
witnessed during the crisis. This course will focus
on the impact of this new thinking and practice
in the assessment of credit risk.

TESTIMONIALS
Excellent trainingmaterial covered was very
enlightening
Financial Analyst, Global Development Agency
Washington D.C.

I think the instructor is great and very

knowledgeablehe also was very good at
understanding and responding to questions.
Financial Analyst, Global Development Agency
Washington D.C

Clive has a very good and wide experience in the

investment and financial markets and is very
capable of tackling all the topics needed for the
training
Manager, Kuwait Investment

The trainer demonstrated his professional

credibility regarding the subject matter
Fund Manager, Australian Pension

Registration Details
Regular Tuition Fee: Rs. 89,000 per participant
*Group Discount: 15% Discount
on 2 or more nominations from the same organization
Includes courseware, certificate, lunch, refreshments and business networking.

For registration(s), send us your

Name, Designation, Organization, Mobile, E-Mail and Postal Address
to register@terrabizgroup.com
For further information please contact
Zeryab Naseer at +92 333 0200 333 and +92 321 8747 595
Phones: +92 21 3455 0319 & 3455 8539 Facsimile: +92 21 3455 7264
Strictly limited seating to ensure value added to all Participants - so book early!
Comprehensive course materials will be provided.
Terrabiz Cancellation Policy: For cancellations made in the 7 working days to the workshop,
no refunds will be given. Cancellations must be confirmed by email. Substitutions may be made at any time.