Financial Products & Associated Risk Management

Credit Risk Measurement - Part 1


This eCourse consists of two modules. Module 1 explains the various measures that enable banks and other institutions to estimate or measure the level of credit risk to which they are exposed. These measures include absolute currency amounts for products such as term loans and estimated currency amounts for products where credit risk varies due to market price/rate movements, in addition to risk-weighted assets (RWAs) and measures of expected loss (EL). The module also outlines some of the limitations and complexities associated with these credit risk measures.

Module 2 describes probability of default (PD), the factors that affect it, how it is calculated, and how it can be converted into an internal credit rating. The module also outlines some of the issues associated with PDs and internal credit ratings, in addition to the differences between internal and external credit ratings. The role of credit rating agencies in the provision of external ratings is also described in detail, along with the main issues surrounding the use of such ratings.


On completion of this course, you will be able to:
- Describe the range of measures that banks
- Use to estimate credit risk
- Outline some of the issues surrounding these measures
- Describe the importance of probability of default (PD) and how it is used in determining an internal credit rating
- Identify the differences between internal and external credit ratings, and outline the function of external credit ratings that are provided by credit rating agencies (CRAs)


Module 1: Credit Risk Measurement - An Introduction
Topic 1: Credit Risk Measures

Module 2: Credit Risk Measurement - PD & Risk Rating
Topic 1: Probability of Default (PD)
Topic 2: External Credit Ratings


Relevant Subject
Type 10 - Providing credit rating services
SFC:1.50, PWMA:1.50
Staff of Corporate Member: HK$460
Non-Member: HK$665
All Member: HK$460