Mitigating Credit Risk
Financial services professionals, consultants, sales professionals interested in providing or selling products and services to banks, investment companies, other financial corporations, and everyone interested in understanding counterparty credit risks and techniques for their mitigation
Please contact us for information about prerequisites.
Over the past decade, credit risk has become a main focus for many financial institutions, most notably banks. Credit risk occurs when there is a possibility of a borrower or counterparty to a transaction being unable or unwilling to perform their financial obligations. Utilizing credit risk mitigation techniques, financial institutions are able to minimize what could otherwise be substantial losses when the credit markets or particular borrowers are under pressure. The losses may sometimes be large enough to render a company insolvent and put it out of business. Mitigating the loss due to credit risk ensures that if conditions deteriorate, the financial institution will be able to recover quickly or even remain unaffected.
This course introduces two main sources of credit risk: pre-settlement risk and settlement risk. It also investigates various methods for mitigating credit risk, such as netting, margins, collateral, and hedging.
Settlements and Netting
- describe pre-settlement, replacement cost, and settlement risk
- distinguish between different types of netting
- recognize the uses of settlements and netting when mitigating credit risk
Margins, Collateral, and Hedging
- identify how margins can mitigate credit risk
- identify how collateral can be used to mitigate credit risk
- recognize how CDS and CLN are used to eliminate credit risk
- recognize how to use margin, collateral, and hedging when mitigating credit risk