Financial Risk Management Services
Risk Analytics and Credit Risk Modelling : An Outline of the areas of training expertise
Introduction to Credit Risk Modelling : Back ground overview
-Traditional Banking and its Challenges: Meaning and Functions of
a bank, Role played by bank in channelizing the funds of an
economy, Business of the banks, Challenges of Traditional lending
strategies of banks, Key sources of risk faced by banks: Credit,
Market and Operational risk.
- A study of the 2008 Financial Crisis and credit risk : Brief
Overview, Causes of the Crisis, Role of Globally Systematically
Financial Institutions (G-SIFIs) in global spill overs of the crisis, Inter
linkages between the banks and the other major financial sector
agents during the crisis, Impact of the burst of the real estate
bubble on the credit portfolios of the bank.
Assignment 1: Content To be decided
-An Overview of the sources of risk for different Banking
Products: Retail Banking Credit Products: Credit Cards, Overdrafts,
Mortgages, Personal Loans, Automobile Loans etc. , Commercial
Products: Direct Lending (Asset Backed Loans, Cash Flow Loans),
Factoring Loans, Equipment Finance, Fleet Finance etc.
An overview of the Regulatory Requirement: Overview of a bank’s
capital structure, Regulatory Capital Reservation Requirements:
BASEL Accords, CCAR & DFAST (Stress Testing Capital
Requirements), Regulations on Allowances and Provisions :
Financial Accounting Standards 5 and 114, FASB CECL, IFRS9:
Overview of the regulations, theoretical frameworks, Key
Characteristics and modelling techniques, Basic similarities and
differences between the regulations.
Assignment 2: Content to be decided
Introduction to Key credit risk modelling Techniques
-Probability Theory and Distribution: Overview of Random Samples, Probability
Mass Functions and Probability Density Function, Examples from credit risk: Loss
Distribution function of banks, Mathematical distribution of Probability of
Default, Loss Given Default etc., Concepts of Theoretical Univariate Distribution:
Bernoulli, Binomial, Poisson, Normal, Negative binomial, Log Normal, Weibull ,
Gamma, Chi-Square, F-distribution etc (Concept, Characteristics and Application
in credit risk domain)
Assignment 3: Content to be decided
-Theory of Statistical Inference: Concept of Sampling and Sampling Distribution
: Simple Random Sampling with Replacement, Simple Random Sampling without
Replacement, Stratified Random Sampling, Choosing the strata in credit risk
models during stratified random sampling., Concept of Estimators: Difference
between an estimator and a statistic, Properties of a good estimator,
Optimisation algorithms of deriving an estimator: Ordinary Least squares,
Maximum Likelihood Estimation etc. , Testing of a statistical hypothesis:
Meaning of Hypothesis, Different kinds of hypothesis: Type -1 and Type-2 errors,
Level of Significance and p-values., Key Statistical tests: Parametric Tests - T-test
(One sample, Two independent sample, Paired sample), ANOVA, F-test, Non-
Parametric Tests: Wilcoxon Test, Mann Whitney U Test, Kolmogorov Smirnov
Test (univariate and bivariate tests), Anderson Darling Test, Jarque-Bera tests.
Assignment4: Content to be decided
Basics of Predictive Modelling: Concepts of Predictive Modelling, Linear
Regression : Assumptions, linear regression model framework, Estimation of
parameters in a linear regression framework, Goodness of Fit measures for
Linear Regression model, Validation metrices for Linear Regression models.
Logistic Regression: Overview (Key Concepts: Odds, Odds Ratio, Log(Odds),
Linear Probability models), Estimation of parameters in a logistic framework,
Validation of Logistic Regression model: Model discriminatory power (AR, KS,
Gini etc), Model Accuracy, Model Stability indices (PSI, CSI, VDI).
Assignment 5: Content to be decided
 Financial Risk Management Services
Risk Analytics and Credit Risk Modelling : An Outline of the areas of training expertise
Credit Risk Modelling: BAU Scorecard Development and Model
Management
-Basic Scorecards: Application Scorecard, Behaviour Scorecards,
Business usage of Business Scorecards
-Scorecard Vocabulary: Default Definition, Observation and
Performance Period, Reject Inference, Roll Rate and Vintage
Analysis, Information Value and Weight of Evidence, Fine Classing,
Coarse Classing, Validation metrics such as Population Stability
Index, Variable Deviation Index, KS Statistic, Rank Ordering,
Accuracy Ratio, Gini, Credit Ratings and rating agencies.
Assignment 6: Topic to be Decided
-Basics of Scorecard development: Scope Analysis and Gap
Assessment, Data Quality Check procedures, Segmentation
(Business and Statistical Segmentation) techniques, Sampling
methodology selection (Training and Validation dataset creation,
Out of Sample validation, Out of Time validation),Variable
reduction techniques, Variable transformation and binning
techniques, Model Development techniques (Logistic Regression,
Survival Analysis, Neural Networks etc.), Score Generation and
Score Calibration.
Assignment 7: Content to be decided
-Model Management: Model Monitoring: Scope and Needs,
Monitoring Metrics: Rank Ordering, Discriminatory Capacity,
Accuracy and Stability, Realignment of scorecards, Validation of
Segmentation structure, Portfolio Reconciliation etc.
Assignment8: Content to be decided
Basel II – The Advanced Internal Rating Based (AIRB) Approach : Development
of PD/LGD/EAD models
Basic Overview of BASEL : Evolution of Basel, Basic idea of Basel norms, Concept
of Loss Distribution , Expected and Unexpected Loss, Asymptotic Single Risk
Frontier model, Risk Weighted Assets (Concept and Formulation)
Capital Structure of Banks : Tiers of Capital (Tier1 Common Capital, Tier1 Capital,
Tier 2 Capital, Tier 3 Capital), Leverage Ratio etc.
AIRB Approach: Components of AIRB approach : PD /LGD/EAD model overview
for Retail and Commercial Portfolios, Low Default Portfolios.
Assignment 9: Content to be decided
PD model development: Definition of Probability of Default (PD), Types of PD:
Stressed and Unstressed PD, PD Rating Philosophies- Point in Time PD , Through
The Cycle PD and Hybrid Approaches, Concepts of Counter Cyclical and Pro-
cyclical buffers, Default Definition and Model Design, PD Model exclusions,
Modelling Techniques (Decision Trees, Logistic Regression etc.), Quantification of
PD, PD model Validation (Out -of-sample and out-of-time validation), Stress
testing of PD models. Assignment10: Content to be decided
LGD Model Development: Concept of Loss given default and recovery rates,
Materiality of Loss, Concepts of Accounting Loss and Economic Loss, Types of LGD
Models (Default LGD and Non-Default LGD), Techniques of Modelling LGD
(Decision trees, Regression Analysis, Survival Analysis etc.), Calculating Downturn
LGD, LGD Quantification and Goodness –of-fit measures of LGD models.
EAD Model Development: Concepts and Overview of EAD, Credit Conversion
Factors (CCF Distributions, Estimating CCF, Utilisation etc.), Types of EAD models
(CCF models, Utilisation models, Loan Equivalent models (LEQ)), Modelling EAD
(Regression Models, Decision tree etc. Assignment 11: Content to be decided
(Includes EAD and LGD)
 Financial Risk Management Services

Risk Analytics and Credit Risk Modelling : An Outline of the areas of training expertise

Credit Risk Modelling : Introduction to IFRS9 Details of Financials:

- Introduction to IFRS9 : Scope of IFRS 9, Asset Classes under MODULE DURATION: 120 HOURS
IFRS 9 , Solely Principal and Payment of Interest (SPPI) Test,
Concept of Expected Credit Loss (ECL): Next 12 Months ECL, MODULE PRICE: INR 30000
Lifetime ECL etc.
- Introduction to Commercial Portfolios: Basel Definition of MODE OF PAYMENT: ONE TIME TRANSFER AFTER FIRST TWO SESSIONS.
Commercial Portfolios, Classification of Commercial Portfolios:
SME and Corporates, Asset Classes under Commercial SESSIONS: WEEKDAYS (7:30 am – 9:30 am)
Portfolios: Commercial Loans, Trade Receivables, Lease
Receivables, Deposits, Bonds etc. Types of Commercial Loans:
Classification by Claims, Risk Based Classification (Leveraged v/s
Non-Leveraged Loans), Classification by Collaterals (Asset
Backed Loans v/s Cash Flow Loans), Balance Sheet items and
Key Financial Ratios.
- Asset Valuation in IFRS9: Fair Value Accounting, Concept of
Discounted Cash Flows, Assets at Fair Value in Profit and Loss,
Fair Value for Other Comprehensive Income, Assets at
amortized cost.
- Modelling Approaches for Expected Credit Loss: Generalised
Approach, Simplified Approach, Generalised Approach v/s
Simplified Approach, Concept of Through the Cycle PD v/s PIT
PD, Staging Analysis (Stage 1, Stage 2 and Stage 3), Staging
Approaches.
- Simplified Approach: Framework of the Simplified Approach,
Scope of Simplified Approach: Trade Receivables, Contract
Receivables, Retention Receivables and Lease Receivables, Roll
Rate analysis, Provision Matrix, Lifetime ECL.
- Generalised Approach: Framework of the Generalised
Approach, Staging Criteria, PD model development techniques:
Logit model, Markov Process, Roll Rate Analysis, Pluto-Tasche
method, Survival Analysis, Loss Given Default and Exposure at
Default.

Assignment 12: Content to be decided