Internal Credit Rating Models & Validation

This course takes an in-depth look at recent developments and current thinking in the design, use and validation of credit risk internal ratings systems. It will cover lessons learned from the credit crisis of 2008-2009, and the limitations of credit risk scoring models in market dislocation situations.

The course aims to equip participants not just with the theory but also the practice, including how to build these tools and how to use them. In addition, it will explicitly cover all the management issues - for example, improvements in performance that go beyond business requirements - that need to be addressed.

This course leverages on the “best practices” employed by leading international banks in developing, validating and back testing sturdy internal rating models. It specifically addresses means of dealing with low default portfolios and on mapping to rating agencies (“through the cycle”) rating PDs while complying with the Basel III requirements. The course also describes most recent advances in the use of machine learning tools for the development and validation of internal rating models.