This class exists in these courses :
• IÉSEG > MSc in Finance > Semestre 2 > 2,00 ECTS

Prerequisites

- basic knowledge of bonds, derivatives and other plain vanilla financial instruments;
- familiaritty with mathematical notations and modelling;
- familiarity with basic accounting, P&L, balance sheet;
- basic knowledge of probibility theory (discrete and continuous random variable, density and distribution function;
- working with Bloomberg, Reuters and Excel;
- have a Kahoot! account.

Learning outcomes

At the end of the course, the student should be able to :
- Breakdown complex organizational problems using the appropriate methodology
- Propose creative solutions within an organisation
- Compose constructive personal feedback and guidance
- Understand what Credit Risk and Counterparty Credit Risk are;
- Understand the difference between Credit Risk and Counterparty Credit Risk;
- Understand what a default probability is, (counterparty) credit risk exposure and a recovery rate;
- Understand which tools are available to mitigate credit risk such as Credit Default Swaps;
- Understand which tools are available to mitigate counterparty credit risk, such as netting, collateralisation and central clearing;
- Understand recent developments in the financial industry to improve the (systemic) stability of the system and the role of regulation (Basel accords);
- Understand how banks treat credit risk on their balance sheets and make credit value adjustments;
- Work with Bloomberg/Reuters on practical cases, implementing their understanding in practice.

Course description

- Sessions 1 and 2 - Introduction to Credit Risk and Counterparty Creit Risk;
- Session 3 - The CDS market;
- Session 4 - Bloomberg/Reuters lab;
- Session 5 - Mitigating Counterparty Credit Risk;
- Session 6 - Presentation of a Pape

Class type

Class structure

Teaching methods

• Case study
• E-learning
• Interactive class
• Presentation
• Research

Assessment

The course assessment is made as follows:
- 6 quizzes taken in class in Kahoot!, testing understanding of the previous session and reading materials and 2 exercises, totaling to 60%;
- research on an actual topic or paper, with a presentation in class, 40%.

Recommended reading

• John Hull - Risk Management and Financial Institutions, (2012), Wiley -

• Jon Gregory - Counterparty Credit Risk (2010), Wiley Finance -

Internet resources

• www.garp.org/#1/frm by the Global Association of Risk Professionals

• Support materials available on the course website

• www.bionicturtle.com - library of document and video tutorials

• www.risk.net/journal-of-credit-risk