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MFE1107 — Credit Risk Measurement and Management 2 | Chương trình đào tạo NEU

MFE1107 — Credit Risk Measurement and Management 2

Credits
3
Self-study hours
90
Showing intake
K68-2026

Course description

Credit Risk Measurement and Management 2 is a specialized course designed for fourth-year students majoring in Quantitative Risk Management or Actuarial Science. The primary objective of this course is to enhance students' comprehension of credit risk management, with particular emphasis on structured finance and credit products such as collateralized debt obligations and credit derivatives. The course encompasses a wide range of topics within Credit Risk Measurement and Management, including credit analysis, quantitative methodologies for assessing exposure at Default, Loss given default, counterparty risk, and credit risk assessment.

Course requirements

Requirements for Final Examination

Attendance score must be at least 5 (according to University regulations).

See Appendix 2, Rubric 1 for attendance evaluation.

Requirements for Class Attendance

Students are expected to attend at least 80% of all scheduled classes.

Any absence must be properly documented (e.g., medical certificate) and approved by the instructor.

Requirements for In-class Behaviour

Students are expected to arrive on time and remain until the end of the class.

Mobile phones and electronic devices should only be used for learning purposes.

Respectful and professional behaviour towards peers and instructors is mandator

Teaching plan

Week 1

Greeting and course introduction, its logic, its role and position in the program
References
Syllabus
Activities
Lecturer introduces the course Lecturer sets learning requirements Lecturer instructs students to read documents Lecturer instructs students to find documents Lecturer instructs to group work Lecturer divides students into working groups
Assessment
Level of participation Level of interaction Quality of answers

Week 1

Chapter 1. Credit Exposure and Funding 1.1. Credit exposure 1.2. Metrics for exposure 1.3. Factors driving Exposure. 1.4. The impact of netting and collateral on exposure.
References
Credit Risk Measurement and Management book, garp.org/frm, 2024.
Activities
Students have to read the related contents before coming to class Lecturer euips students with theorical information Student have to discuss the circumstances and questions asked by the lecturer
Assessment
Level of participation Level of interaction Quality of in-class answers and exams

Week 2

Chapter 2. Exposure at Default (EAD) and Adverse Selection 2.1. Regulatory perspective on EAD 2.2. EAD modeling
References
Credit Risk Measurement and Management book, garp.org/frm, 2024.
Activities
Students have to read the related contents before coming to class Lecturer euips students with theorical information Students have to discuss the circumstances and questions asked by the lecturer
Assessment
Level of participation Level of interaction Quality of in-class answers and exams

Week 4

Chapter 3. Loss Given Default (LGD) and Recovery Rates 3.1. Definition of LGD 3.2. Marginal LGD models 3.3. LGD models
References
Credit Risk Measurement and Management book, garp.org/frm, 2024.
Activities
Students have to read the related contents before coming to class Lecturer euips students with theorical information Students have to discuss the circumstances and questions asked by the lecturer
Assessment
Level of participation Level of interaction Quality of in-class answers and exams

Week 6

Chapter 4. Low Default Portfolios 4.1. Basic concepts 4.2. Developing predictive models for skewed data sets 4.3. Mapping to an external rating agency 4.4. Confidence level-based approach 4.5. LGD and ead for low default portfolios
References
Credit Risk Measurement and Management book, garp.org/frm, 2024. Bart Baesens, Daniel Rösch,Harald Scheule (2016), Credit Risk Analytics: Measurement Techniques, Applications, and Examples in SAS, Wiley.
Activities
Students have to read the related contents before coming to class Lecturer euips students with theorical information Student have to discuss the circumstances and questions asked by the lecturer
Assessment
Level of participation Level of interaction Quality of in-class answers and exams

Week 7

Chapter 5. Model Validation and Stress testing 5.1. Basic concepts of validation 5.2. Quantitative validation 5.3. Qualitative validation 5.4. Stress testing
References
Credit Risk Measurement and Management book, garp.org/frm, 2024. Bart Baesens, Daniel Rösch,Harald Scheule (2016), Credit Risk Analytics: Measurement Techniques, Applications, and Examples in SAS, Wiley.
Activities
Students have to read the related contents before coming to class Lecturer euips students with theorical information Student have to discuss the circumstances and questions asked by the lecturer
Assessment
Level of participation Level of interaction Quality of in-class answers and exams

Week 8

Present group exercise.
References
Credit Risk Measurement and Management book, garp.org/frm, 2024.
Activities
Students have to read the related contents before coming to class Lecturer euips students with theorical information Students have to discuss the circumstances and questions asked by the lecturer
Assessment
Level of participation Level of interaction Quality of in-class answers and exams

Week 10

Chapter 6. Portfolio Credit Risk 6.1. Default correlation 6.2. Credit portfolio risk measurement 6.3. Default distributions and credit VaR with the single-factor model
References
Credit Risk Measurement and Management book, garp.org/frm, 2024. Bart Baesens, Daniel Rösch,Harald Scheule (2016), Credit Risk Analytics: Measurement Techniques, Applications, and Examples in SAS, Wiley.
Activities
Students have to read the related contents before coming to class Lecturer euips students with theorical information Students have to discuss the circumstances and questions asked by the lecturer
Assessment
Level of participation Level of interaction Quality of in-class answers and exams

Week 11

Chapter 7. Bayesian Methods for Credit Risk Modeling 7.1. The Bayesian approach to statistics 7.2. PD estimation with Bayesian statistic 7.3. PD estimation for low default portfolio
References
Credit Risk Measurement and Management book, garp.org/frm, 2024. Bart Baesens, Daniel Rösch,Harald Scheule (2016), Credit Risk Analytics: Measurement Techniques, Applications, and Examples in SAS, Wiley.
Activities
Students have to read the related contents before coming to class Lecturer euips students with theorical information Students have to discuss the circumstances and questions asked by the lecturer
Assessment
Level of participation Level of interaction Quality of in-class answers and exams

Week 12

Chapter 8. Collateral 8.1. Collateral terms 8.2. Mechanics of collateral 8.3. Collateral and funding 8.4. Collateral usage
References
Credit Risk Measurement and Management book, garp.org/frm, 2024.
Activities
Students have to read the related contents before coming to class Lecturer euips students with theorical information Students have to discuss the circumstances and questions asked by the lecturer
Assessment
Level of participation Level of interaction Quality of in-class answers and exams

Week 13

Chapter 9. Credit and Debt Value Adjustments 9.1. Credit value adjustment. 9.2. Impact of credit 9.3. Assumptions cva allocation and pricing 9.4. CV with collateral
References
Credit Risk Measurement and Management book, garp.org/frm, 2024.
Activities
Students have to read the related contents before coming to class Lecturer euips students with theorical information Students have to discuss the circumstances and questions asked by the lecturer
Assessment
Level of participation Level of interaction Quality of in-class answers and exams

Week 14

Chapter 10. Counterparty Risk 10.1. Background 10.2. Components 10.3. Control and quantification 10.4. Beyond cva
Activities
Groups report and answer questions Lecturer and class members comments
Assessment
Assessment sheet with the following criterium: (i) Content; (ii) ; (iii) Attractive and persuasive presentation; (iv) Degree of cooperation in answering questions; (v) Presentation time

Week 15

Complete group exercise/ Midterm test Analysis report of marketing activities in a specific unit
Activities
Groups submit reports Lecturer evaluates reports
Assessment
Assessment sheet with the following criterium: (i) Content; (ii); (iii) Time; (iv) Cross-evaluation
Final exam
Activities
Students take exams according to givem schedule
Assessment
According to the exam requirement

Learning resources

  • 1. Course Books
  • Credit Risk Measurement and Management book, garp.org/frm, 2025
  • 2. References
  • Standard lecture notes/slides 2025
  • 3. Other resources available at the University Library
  • https://www.garp.org/frm/study-materials
  • https://www.bis.org/
  • Valuation and risk model book, garp.org/frm, 2024
  • Operational Risk and Resiliency book, garp.org/frm, 2024
  • Jonathan Golin and Philippe Delhaise, The Bank Credit Analysis Handbook, 2nd Edition (Hoboken, NJ: John Wiley & Sons, 2013)
  • Credit Risk Analytics: Measurement Techniques — Bart Baesens, Daniel Rösch, Harald Scheule, Applications, 2016