Theory of Credit Risk Models

For the Actuarial Students

• This course is designed for actuaries writing exam: SP9/CM2/CP1.

• It is theoretical in nature and designed to introduce a student to the material.

• It is not a substitute for studying, rather a supplement.

Introduction

• Risk is defined as the consequences resulting from uncertainty.

• Credit Risk is defined as when a third party doesn't meet their obligation.

Content

• Part 1 is an introduction to Risk and looks at the mathematical properties of risk measures.

• Part 2 is about being aware of Credit Risk

• Part 3 is about identifying Credit Risk and its sources of uncertainty.

• Part 4 is about the models used to assess Credit Risk.

• Part 5 is about the Merton Model with an introduction to Option Pricing.

• Part 6 is about Migration and Portfolio Models

• Part 7 is about managing Credit Risk and goes beyond just using collateral.

• Part 8 is an Appendix for the Jarrow-Turnbull Model (Stochastic & Markov Processes)