AFF5380 - Credit risk modelling

Leader(s): Mr Jean Pierre Fenech

Offered

Not offered in 2009

Synopsis

This unit develops knowledge and improves skills in credit risk modelling by using market information to predict defaulted firms. The topics discussed will provide an understanding of their relative merits, the issues involved in their implementation and their use in the pricing and risk management of credit risk. This unit assists practitioners and students alike to understand better the use of credit risk models and moves them away from the proverbial Black Box scenario.

Objectives

The learning goals associated with this unit are to:

• develop credit risk modelling using Altman and Ohlson models
• develop an understanding of credit risk modelling approaches
• analyse the Merton structural model and implications for credit analysis
• analyse the term structure of credit spreads and probabilities of default
• analyse implications of alternative ways to model recovery
• develop correlations between default rates and recovery
• develop copula based approach to modelling default dependence.

Assessment

Within semester assessment: 50%
Examination (3 hours): 50%

Contact hours

3 hours per week

Prerequisites

AFF9140