Fiches de cours 2017-2018

Credit risk

Enseignant(s) :

Trevisan Christopher

English

Only for MA3

Summary

The course covers credit risk models as well as institutional features of credit derivative markets. The course covers single-name credit risk, as well as models of credit correlation and portfolio credit risk. The recent crisis and the current regulatory changes will also be discussed.

Content

1. Introduction to credit markets
2. Scoring models
3. Structural models
4. Reduced-form models
5. Empirical determinants of credit spreads
6. Credit Default Swaps (CDS)
7. Collateralized Debt Obligations (CDO)
8. Copulas, Credit Valuation Adjustment (CVA)
9. Measuring sovereign default risk

Keywords

Credit risk, bankruptcy, ratings, securitization, CDS, CDO, CVA, Structural models, Reduced-form models, Copula.

Learning Prerequisites

Required courses

• Derivatives
• Econometrics
• Introduction to finance
• Investments
• Stochastic calculus I
• Stochastic calculus II

Learning Outcomes

By the end of the course, the student must be able to:
• Derive the Merton model
• Differentiate between structural and reduced-form models
• Model single name and portfolio default risk
• Explain the structure of Collateralized Debt Obligations (CDO)
• Describe three different reduced-form recovery models
• Assess / Evaluate Credit Default Swaps (CDS)
• Explain the Credit Spread Puzzle
• Implement the Gaussian Copula Model
• Assess / Evaluate Junior, Mezzanine and Senior Tranche prices
• Distinguish three extensions of the Merton model

Transversal skills

• Use both general and domain specific IT resources and tools
• Communicate effectively, being understood, including across different languages and cultures.
• Use a work methodology appropriate to the task.
• Access and evaluate appropriate sources of information.

Teaching methods

Lectures, homework

40% Homework

60% Final Exam

Resources

No

Bibliography

Duffie and Singleton, Credit Risk: Pricing, Measurement and Management, Princeton University Press, 2003.

Lando, Credit Risk Modeling: Theory and Applications, Princeton University Press, 2004.

Semaine de référence

LuMaMeJeVe
8-9
9-10
10-11   EXTRANEF_126
11-12
12-13
13-14EXTRANEF_126
14-15
15-16
16-17
17-18
18-19
19-20
20-21
21-22

Cours
Exercice, TP
Projet, autre

légende

• Semestre d'automne
• Session d'hiver
• Semestre de printemps
• Session d'été
• Cours en français
• Cours en anglais
• Cours en allemand