Credit Portfolio Risk Management

4 days 18-21 Sep 2017, London UK £4,295.00 + VAT* Download brochure Add to basket

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Overview

This course is designed to help participants understand the significant components and features of credit portfolio modelling and management (CPM). The aim is to elucidate how a broad range of risk modelling and risk assessment approaches can be brought together to enable risk-based pricing and assessment—ultimately enabling portfolio managers to choose investments based upon fundamentals as well as market dynamics. During the course, the instructor—a former senior executive, board member and CRO of a large, emerging markets, publicly-listed banking group—will also endeavor to offer his experience in developing CPM techniques to fit the emerging markets landscape. This would include discussions of how the CPM framework can be developed in lieu of a complete systems architecture, when credit reference and credit rating bureaus are not available and when data and past history on customers is sparse. Primary focus is also given to best-practice and to quantitative methods that are actually demonstrated to work in practice across many of the 40 countries and 4 continents in which instructor has direct experience. In addition, participants will learn:

  • The elements necessary for internally developing and testing a ratings and scoring system that can be used with various exposure types—including privately listed, small to medium-sized enterprises (SMEs)
  • How to integrate a quantitative, credit scoring platform with a qualitative ratings system in Basel II/III-compliance fashion
  • How to develop the necessary CPM databases for estimating and validating scoring models and risk components, such as Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD)
  • Portfolio-level measures of risk, including measures of concentration using Copulae, tail dependence and other advanced measures
  • How to use Monte Carlo simulation and basic programming to develop and test scoring models and to model portfolio dependence, persistence, dynamics and stress-testing
  • How to use this integrated system in both origination and portfolio management activities
  • How to assess Expected Loss (EL) for provisioning and Unexpected Loss (UL) for capital allocation—both on a standalone and portfolio basis
  • How to create a Risk-Adjusted-Performance-Measurement (RAPM, aka RAROC) system

As well as useful techniques related to specific topics, such as:

  • Strategies for extracting important information from problem accounts
  • How to explain quantitative model results to qualitative-oriented directors and shareholders

Instructors

We work with a series of expert instructors, please select the course location of interest to review the credentials of who will be delivering the programme.

London
Maurice Ewing

The course instructor holds a PhD, is an experienced executive, Chief Risk Officer (CRO), board member and consultant. He is the founder and CEO of Conquer Risk, a consulting firm that conducts investment due diligence of corporates and banks, specialising in emerging and frontier markets. Until recently, the instructor held the group CRO role for one of Africa's largest banks for which he developed the entire enterprise risk management (ERM) and risk oversight functions, sitting on the board and managing over 400 people within 10 departments, spanning 5 countries. He is a sought after speaker on risk oversight, strategy and corporate governance but has also trained numerous management teams in predictive analytics, market intelligence acquisition and internal model development for Basel II & Basel III purposes. He previously taught Executive-MBAs on the full-time finance faculty of the Kellogg-HKUST business program and, before that, worked as a regulator for both the New York Federal Reserve and the Board of Governors. A former dissertation advisee of Ben Bernanke, the US Federal Reserve Chairman, the instructor holds a PhD and MA in economics from Princeton University and a BA in Economics and Mathematics from Northwestern University. He was recently selected out of over 50,000 candidates to the prestigious board of the Professional Risk Manager's International Association as a Subject Matter Expert on ERM. He is also a certified Financial Risk Manager (FRM) with the Global Association of Risk Professionals.

Venue

London

Central London Hotel Venue

All courses are held at four or five star venues in Central London, Zone 1. We strive to provide you with a training environment of the highest quality, to ensure that the whole learning experience exceeds your expectations.

Your training venue will be confirmed by one of our course administrators approximately 3-4 weeks before the course start date.

Related Courses

Inhouse


 

Do you have five or more people interested in attending this course? Do you want to tailor it to meet your company's exact requirements? If you'd like to do either of these, we can bring this course to your company's office. You could even save up to 50% on the cost of sending delegates to a public course.

To find out more about running this course in-house:





Our Tailored Learning Offering

If you want to run this course at a location convenient to you or if you want a completely customised learning solution, we can help.

We produce learning solutions that are completely unique to your business. We'll guide you through the whole process, from the initial consultancy to evaluating the success of the full learning experience. Our learning specialists ensure you get the maximum return on your training investment.

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We can offer any of our public courses delivered at your office or we can devise completely tailored solutions:


Read more about our offering or complete a call back request to speak to a learning specialist.

 

Agenda

Day  1

Overview of Credit Portfolio Management


What Credit Portfolio Management boils down to

  • Applications, scorecards and credits
  • Flat pricing
  • Risk-based pricing
  • Portfolio management and the portfolio manager
  • Portfolio performance metrics
  • Capital allocation and provisioning
  • Basel II related issues
  • Some structural hurdles in the emerging, Small-to-Medium Enterprise (SME) market
  • Hurdles in emerging markets

Foundations of the Credit portfolio management system:

  • Metrics for managing a portfolio
  • Creating an internal scoring and rating system
  • Exemplary ratings systems
  • Establishing the number of grades
     - Excel exercises
  • Relevant rating criteria
  • In Class Exercises in developing a ratings system

Day  2

Foundations of the Credit Portfolio management system (cont’d):


Developing the SME scoring model

  • Public companies
  • Dealing with private, unaudited companies
  • Structural models: Black-Scholes-Merton
     - Public firm variants
     - Private firm variants
     - What will like work in African markets
  • Excel exercises
  • Statistical models
  • Actuarial Models
  • Excel exercises

Testing and Validating these models

  • Excel Exercises

Overcoming hurdles in acquiring the necessary information in emerging markets

  • Scope for publicly listed companies and exposures
  • Databases and data management
  • Statistical models
  • Portfolio models
     - Asymptotic single risk factoring (ASRF) and loss measurement
     - Copulae based measurement

Day  3

From scores to PDs

  • Why we do not like statistical obligor PDs in retail
  • Segmentation
     - Vintage analysis
     - Delinquency status
  • Developing a PD model
     - Smoothing

Loss given default  measurement (LGD)

  • Various loss model techniques
  • Workout LGDs
  • Actuarial LGDs
  • Statistically based LGD
  • Portfolio level (risk pool) LGDs

Exposure at default (EAD)

  • EAD modeling techniques
  • ASRF-based EAD
  • Statistically based EAD  

Day  4

Expected Loss (EL) and Unexpected Loss (UL) for Single exposures

  • Provisioning and Basel II-related issues
  • Economic capital allocation

Using your risk model for capital allocation
Developing a Risk-adjusted-performance measurement (RAPM) system

  • Using EL and UL
  • Excel Exercises

EL and UL for Portfolios

  • Correlation and joint default estimation
  • Obtaining a Credit Value-at-Risk (CreditVaR)
  • Setting Economic Capital
  • Excel Exercises

Using RAPM in the portfolio setting

Testing and Validating the ratings system

  • Database validation
     - Default definition issues
     - The search for randomness—sampling issues
     - Ensuring database size is sufficient
     - Matching the data type with the model scope
     - Missing data issues and problems
  • Out-of-sample validation of scoring models
     - Construction of the testing sample
     - Confusion matrices and how to use them
     - Error cost determination
     - Non-parametric test statistics
             Rank tests and accuracy ratios
            ROC-Mann-Whitney-U versus Cumulative Accuracy Profiles
     - Various other tests
  • Model Selection using Accuracy Ratios and Costs
     - Confidence intervals for U-statistics
     - Why there is no target, “best” accuracy ratio
     - How to select models using in-sample and out-of-sample results in combination with error cost estimates

Day  5


Risk Component Backtesting

  • Probability of Default (PD) backtesting
     - Hosmer/Lemeshow
     - Binomial Tests
     - Brier Score
     - Other tests
     - Problems with the Central Limit Theorem in practice
  • Loss Given Default (LGD) backtesting
     - Choosing a low operational risk LGD estimation method
     - Backtesting and confidence intervals

Portfolio stress testing, provisioning and recapitalisation

  • Defining stress tests
  • Distinguishing scenarios and sensitivity analysis
  • Interpreting results
  • Articulating results internally and to investors and regulators
  • Incorporating in the Internal Capital Adequacy Assessment Process (ICAAP)

Concluding Remarks


 

Why us


We have a combined experience of over 60 years providing learning solutions to the world’s major organisations and are privileged to have contributed to their success. We view our clients as partners and focus on understanding the needs of each organisation we work with to tailor learning solutions to specific requirements.

We are proud of our record of customer satisfaction. Here is why you should choose us to help you achieve your goals and accelerate your career:

  • Quality – our clients consistently rate our performance ‘excellent’ or ‘outstanding’. Our average overall score awarded to us by our clients is nine out of ten.
  • Track record – we have delivered training solutions for 95% of worlds’ top 100 banks and have trained over 250,000 professionals.
  • Knowledge – our 150 strong team of industry specialist trainers are world leading financial leaders and commentators, ensuring our knowledge base is second to none.
  • Reliability – if we promise it, we deliver it. We have delivered over 20,000 events both in person and online, using simultaneous translation to delegates from over 180 countries.
  • Recognition – we are accredited by the British Accreditation Council and the CPD Certification Service. In an independent review by Feefo we scored 96% on service and 95% on product