Financial Products & Associated Risk Management

Credit Risk - Part 3 (2020)


This eCourse consists of three modules on Counterparty Credit Risk (CCR). The global financial crisis highlighted the problem of CCR in financial markets. This is a risk that was not fully recognised or effectively managed in the lead-up to the crisis. In view of bank capital was inadequate to cover CCR, Basel III strengthened the regulatory requirements in relation to it.

Module 1 provides a high-level overview of CCR, including its measurement for capital adequacy purposes and the tools and techniques used to manage it.

Module 2 focuses on the way CCR is measured. It also examines how the global financial crisis and subsequent Basel III requirements resulted in significant changes to the measurement of the CCR and the associated capital charges.

Module 3 examines the risk management tools and techniques, such as netting, portfolio/trade compression, collateralisation, termination, hedging, and limits. It also describes how CCPs work in today’s market and the risks associated with them. In addition, the module also looks at the role of bank’s CVA desk in managing CCR, CVA, and other risks and how it uses a transfer pricing model to charge for its services.


On completion of this course, you will be able to:
- Identify the sources of counterparty credit risk (CCR) and the risk factors that impact CCR
- Recognise the key measures of CCR exposure
- Identify the various tools and techniques that can be used to manage CCR
- Identify the difference between current exposure and future exposure and calculate CCR using the various exposure measures
- Define credit value adjustment (CVA) and the various other value adjustments (xVAs)
- Identify the various approaches for calculating regulatory capital charges for CCR and CVA risk
- Recognise how tools and techniques such as netting, portfolio compression, and collateralisation can be used to manage CCR
- Identify the crucial role played by central counterparties (CCPs) when it comes to managing CCR in the market
- Identify the key components of bank’s CCR risk management framework and the role played by CVA desks


Module 1: Counterparty Credit Risk (CCR) - An Introduction
Topic 1: Overview of CCR
Topic 2: Measuring CCR
Topic 3: Managing CCR

Module 2: Counterparty Credit Risk (CCR) – Measurement
Topic 1: CCR Exposure Measurement
Topic 2: CVA & xVAs
Topic 3: Capital Requirements

Module 3: Counterparty Credit Risk (CCR) - Management
Topic 1: Tools & Techniques for Managing CCR
Topic 2: CCR & Central Counterparties
Topic 3: Managing & Reporting CCR


Relevant Subject
SFC:3.50, PWMA:3.50
All Member: HK$1135
Staff of Corporate Member: HK$1135
Non-Member: HK$1715