The purpose of this advanced-level seminar is to give you a thorough understanding of state-of-the-art tools and techniques for measuring and managing credit risks.

First, we discuss important market developments that have lead to and increased focus on the management of credit risk: The integration of market and credit risk; the increasing use of off-balance financing techniques and complex structures such as CDO-Squared; the introduction of the new Basel framework for capital coverage; and, of course, the market turbulence that followed in the wake of the "subprime" crisis.

We then take you beyond the Basel guidelines to develop a powerful program for controlling your firm's credit risk. We explain how different credit risk modelling techniques, including structural models (such as Merton, Black and Cox, Longstaff and Schwartz, Zhou and Hull and White), as well as "reduced form" models (such as Duffie and Singleton and Lando), can be used for the estimation of credit default risk and default correlations. We also take a critical look at Gaussian copula model and explain how these models have been used – and misused - in justifying AAA-ratings of CDOs.

We explain how "Credit VaR" is calculated and used as basis for risk-adjusted pricing of loans, bonds and more complex structures, and for allocation of risk capital. We explain how "economic capital" is calculated, and how economic capital is used as basis for risk-adjusted performance measurement and internal capital allocation. We also explain how counterparty risk arising from OTC derivative and securities lending transactions can be modelled and measured.

Further, we present and explain methods for transfer, repackaging and mitigation of credit risk, including the use of collateral, margining, credit guarantees, and credit derivates. We give an in-depth explanation of the mechanics and pricing of the instruments, and we give examples of how credit default swaps, total return swaps and credit options are used to gain or reduce exposure to credit risk and credit spread risk.

Finally, we explain how credit risk can be bundled, repackaged and sold as Asset Backed Securities. We give a history of the rise, decline, and fall of securitization, and we give and overview of industry and policy initiatives aimed at restarting sustainable securitization.