Advanced Credit Risk Modeling for Basel II Using SAS
Course held in English
Aims and Scope
In this advanced course, we start
with providing an overview of all issues and difficulties that
arise when modeling loss given default (LGD) and exposure at
default (EAD). We also elaborate on how to do validation,
backtesting and stress testing. We then discuss some
recent techniques that have been developed for PD, LGD and
EAD modeling in the context of the Basel II regulation. More
specifically, we will discuss neural networks, support vector
machines and Bayesian probabilistic network classifiers. We
also discuss how survival analysis may be used to do profit
scoring and risk based pricing. The course aims at providing
a sound mix of both theoretical, technical insights as well
as practical implementation details, illustrated by several
real-life cases. It will be highly interactively organised.
Target Audience
Consists of people who are involved into building
scoring systems (e.g. for Basel II) and/or are responsible for
monitoring their behaviour and performance.
Prerequisites
The course assumes that the participants
have the following background knowledge:
Basic implications of the Basel II Capital Accord
Difference between Application Scoring/Behavioural Scoring/Profit
Scoring
Preprocessing for credit scoring (weights of evidence,
outliers, missing values, coarse classification)
Know how to develop scorecards using logistic regression
Setting cut-offs; dealing with reject inference
Measuring scorecard performance
Course
outline
A Review of Basel II • New developments
in the Basel II Capital Accord
• A brief review of PD modeling
• Portfolio models for credit
risk
• The Basel II capital requirement formula’s
Modelling LGD and EAD • Modelling Loss Given
Default (LGD)
• Defining LGD
- Measuring collateral
- Workout approach
- Market Approach
- Collection scoring
• Time weighted versus default weighted versus exposure
weighted LGD
• Choosing the discount factor and the workout
period
• Economic downturn LGD
• Modelling LGD using segmentation
• Shaping the Beta distribution
for LGD
• Risk Drivers for LGD
• Modelling LGD using regression
• Modelling Exposure at Default
(EAD)
- Estimating credit conversion factors (CCFs)
• Cohort/Fixed time horizon/Momentum approach for CCF
• Risk
drivers for CCF
• CAP Curves for LGD and CCF
• Calibrating PD/LGD/CCF
• Correlations between PD, LGD and EAD
• Calculating expected
loss (EL)
• Measuring PD, LGD and EAD at the portfolio level
Validating and stress testing PD, LGD
and EAD models • Validating PD, LGD and EAD models
• Quality Control
• Quantitative versus Qualitative validation
• Use testing
• Through-The-Cycle (TTC) versus Point-In-Time (PIT)
validation
• Backtesting for PD, LGD and EAD
• Traffic Light Indicator Approach
• Backtesting action plans
• Stress testing for PD, LGD and EAD
• Static versus Dynamic stress
stesting
• Correlated Trend Analysis
• Monitoring PD, LGD and EAD models
• Segmenting PD, LGD and EAD
models
• Benchmarking
• Internal versus External benchmarking
• Kendall’s tau
and Gamma for benchmarking
• Scorecard management
• Low Default Portfolios (LDPs): implementation
and validation
• Value-at-risk (VaR) models
• The Merton/Vasicek model for calculating
the regulatory capital
New techniques to develop PD, LGD and
EAD models for Basel II • A brief review of traditional
techniques for scorecard development
- Neural networks
- The neuron model
- Multilayer perceptrons (MLPs)
• Training an MLP
• Support Vector
Machines
- The SVM classification model
- Building scorecards using SVMs • Real life case study: Using logistic regression and support
vector machines to develop a country rating system.
Survival analysis for profit scoring • Survival
analysis for developing customer lifetime models
• The censoring problem
Survival curves versus hazard
curves
Kaplan Meier analysis
Proportional hazards regression
• Using survival analysis for LGD modeling and profit
scoring
• Risk Based Pricing
Per
conoscere le date
e altre informazioni sul corso
telefonate al Servizo Formazione
al numero
02 831 341 r.a.
contattateci
Servizio
Formazione SAS
Via Carlo Darwin, 20/22
20143 Milano
