Credit risk modelling

Is Credit Risk modelling dead after the recent financial crisis? Should banks follow pre-define rules for calculating credit-risk related capital requirements (also denominated “standardized approach”) instead of using tailor-made credit risk models (“Advanced Internal Rating-Based approach”)? In order to answer these questions, it is important to have a clear understanding of the benchmark techniques currently in use by the financial industry (in particular, the assumptions over which they are based and their limitations). This course aims to provide a first step on that direction.

This is an introductory course on Credit Risk. As such it will cover some of the benchmark approaches for estimating the key AIRB parameters (PD, LGD and EAD). It will also discuss the regulatory requirements related to each of them. Some of these approaches will be implemented using the software R.