## Credit Risk Management

03-07-18 0 comment

Course Name: Credit Risk Management

Teachers: Dimitris Karanastasis

School: Finance and Statistics

Department: Banking and Financial Management

Course ID: ΧΡΜΔΠΚ01 Semester: 7th

Course Type: Elective Course

Prerequisites: –

Teaching and Exams Language: Greek

Course Availability to Erasmus Students: No

Course webpage:

 Specific Teaching Activities Weekly Teaching Hours Credit Units Lectures and Exercises 4 5

#### Introduction

• Theoretical Introduction
• The importance of risk management for a financial institution (internal management, supervisory authorities)
• Risk – return trade – off
• Financial institutions’ management incentives and the importance of supervisory control
• Technical Introduction
• Volatility (definitions, assumptions, valuation methods, possible problems)
• Correlation (definitions, assumptions, valuation methods, possible problems)
• Copulas (definitions, assumptions, valuation methods, possible problems)

#### Market Risk

• Risk Management: Standalone & Cumulative
• Standalone
• Derivatives – Greek letters
• Cumulative
• RiskMetrics – Value at Risk (VaR)
• Expected Shortfall
• VaR estimation:
• From historical data – Historical Simulation
• Theoretical model
• Monte Carlo simulation

#### Credit Risk

• Credit Ratings
• Altman’s Z-score
• Default probability based on historical data
• Default recovery rates
• Default probability estimation (bond prices)
• Default probability estimation: historical data vs bond prices
• Default probability estimation (stock prices)
• Distance to Default (Merton’s Model)
• Credit VaR
• Credit Risk Plus
• CreditMetrics

#### Teaching Results

The goal of the course “Credit Risk Management” is the in-depth examination on the measurement and management of risks faced by financial institutions and the financial system. The main type of risks that are being analysed during the course are the Market Risk and the Credit Risk. The presentation of these risks is being done through the usage of realistic examples.

With the successful completion of the course, a student:

• Will be aware of how financial institutions operate, as well as the risks they face.
• Will be able to understand the theoretical framework and apply the statistical tools to measure the different types of risk.
• Will be able to solve risk management problems by effectively using the technical approaches used by financial institutions to manage risk.

#### Skills

• Retrieve, analyze and synthesize data and information, with the use of necessary technologies
• Decision making
• Work in an international context
• Advance free, creative and causative thinking

#### Teaching and Learning Methods - Evaluation

Lecture: Ιn Class

Use of Information and Communication Technologies: Teaching through Microsoft Powerpoint slides, Contact with students through email

Teaching Analysis:

 Activity Semester Workload Lectures 26 In – class lectures 26 Bibliography study 13 Standalone studying 85 Total 105

Student Evaluation:

Final written exam (100%):

–  Multiple choice questions

–  Risk valuation exercises

#### Recommended Bibliography

– Recommended Bibliography: Instructor notes and policy aricles for the ECB, the Fed, the BIS.

– Related scientific journals:

Greek:

• Γ. Σαπουντζόγλου & Χ. Πεντότης, Τραπεζική Οικονομική, Τόμος Α’

English:

• Saunders & M.M. Cornett, Financial Institutions Management: A Risk Management Approach, McGraw Hill
• John C. Hul, Risk Management and Financial Institutions, Pearson Education
• John C. Hul, Options, Futures, and Other Derivatives, Pearson Education
• Lars Peter Hansen, CHALLENGES IN IDENTIFYING AND MEASURING SYSTEMIC RISK, NBER, Working Paper 18505, November 2012
• Adrian, Tobias; Brunnermeier, Markus K., CoVaR, American Economic Review, Volume 106, Number 7, July 2016, pp. 1705-1741 (37).

Viral V. Acharya, Lasse H. Pedersen, Thomas Philippon and Matthew Richardson, Measuring Systemic Risk, Review of Financial Studies (2017) 30 (1): 2-47