Counterparty Credit Risk Management Mastery


Counterparty Credit Risk Management Mastery , Master the intricacies of Counterparty Credit Risk Management with this comprehensive course.

What you”ll learn:

  • Fundamentals of Counterparty Credit Risk: Gain a strong foundation in the basic principles and concepts of counterparty credit risk management.
  • Financial Risk Management Techniques: Explore various financial risk management strategies and techniques employed in real-world scenarios.
  • Components and Terminology: Understand the key components and terminology associated with counterparty credit risk, essential for effective risk assessment.
  • Quantifying Credit Exposure: Learn methods to quantify credit exposure, including metrics for Credit Exposure (EE & EPE).
  • Mitigation Strategies: Explore strategies to mitigate counterparty risk, focusing on controlling and reducing credit risk effectively.
  • Collateral Management: Understand the role of collateral in credit risk, including types of collateral and its impact on risk mitigation.
  • Credit Default Swaps (CDS): Dive into the details of credit default swaps, understanding their structure, uses, and risk factors.
  • Pricing and Valuation: Learn practical formulas for pricing counterparty credit risk, exploring new trade pricing and the impact of credit risk on valuation.
  • Regulatory Frameworks: Familiarize yourself with regulatory frameworks such as Basel II, Advanced IRB Approach, and Exposure at Default.
  • Trading Desk Approaches: Understand the trading desk approach, its continuation, and methods for charging counterparty risk effectively.
  • Role of Central Counterparties (CCPs): Explore the role and significance of Central Counterparties in mitigating counterparty credit risk
  • Risk Management Applications: Delve into practical applications of risk management, including portfolio models, economic capital, and insurance approaches.
  • Drift and Loss Distribution: Comprehend the concepts of drift, loss distribution, unexpected loss, and how these factors influence risk management decisions.
  • Strategies for Risk Hedging: Explore effective strategies for hedging risky mark-to-market (MtM) positions and managing gap risk.
  • Current Industry Practices: Gain insights into current industry practices for managing counterparty credit risk in financial institutions.
  • By the end of this course, students will have acquired a comprehensive skill set in counterparty credit risk management


Welcome to the “Counterparty Credit Risk Management Mastery” course, where you’ll delve into the complexities of effectively managing counterparty credit risk in financial markets. This course is designed to provide a deep understanding of key concepts and strategies, equipping you with the skills needed to navigate the intricate landscape of credit risk.

Throughout this mastery, you will explore the fundamentals of financial risk management, gain insights into counterparty risk components, and discover methods to quantify and control credit exposure. Learn the nuances of mitigating counterparty risk, understanding collateral, and estimating default probability. Delve into the world of credit derivatives, pricing, and regulatory frameworks such as Basel II.

By the end of this course, you will have mastered essential tools and techniques for managing counterparty credit risk, enabling you to make informed decisions in the dynamic financial environment. Embrace the challenges of credit risk management and emerge as a proficient practitioner in this critical domain. We will be learning the followings section-wise:

Section 1: Introduction

The course begins with an insightful exploration into the realm of Counterparty Credit Risk (CCR), providing a foundational understanding of its significance in financial markets and risk management strategies.

Section 2: Getting Started

Delve into the essentials of Financial Risk Management, unravel the intricacies of Value at Risk (VAR), and gain valuable insights into Derivatives Markets, setting the stage for a comprehensive understanding of counterparty risk within this context.

Section 3: Counterparty Risk

This section delves deep into the multifaceted nature of counterparty risk, examining its components and terminology, offering a holistic view that forms the basis for subsequent discussions on risk control and mitigation.

Section 4: Controlling Counterparty Risk

Explore practical examples of default probability and credit risk in counterparty risk scenarios, and understand the illustration of potential future exposure, equipping you with the tools to effectively control and manage counterparty credit risk.

Section 5: Quantifying CR

Uncover the methodologies for quantifying counterparty risk, including metrics for credit exposure and the measurement of Exposure at Default (EAD), providing a comprehensive framework for risk assessment and management.

Section 6: Mitigating Counterparty Risk

This section focuses on practical strategies for mitigating counterparty risk, offering valuable insights into risk reduction techniques and methodologies to enhance risk management practices.

Section 7: Netting and Close Out

Understand the concept of netting and close-out procedures, exploring their impact on counterparty risk, and gaining practical knowledge on how these measures contribute to risk mitigation.

Section 8: Impact of Netting

Delve into the detailed examination of the impact of netting, shedding light on its implications and effectiveness in reducing counterparty risk within financial transactions.

Section 9: Collateral

Explore the role of collateral in counterparty credit risk, understand various types of collateral, and delve into its significance in mitigating risks associated with financial transactions.

Section 10: Mitigating CP Risk

This section provides real-world examples of collateral usage, guiding learners through scenarios that demonstrate the effective mitigation of counterparty credit exposure through collateral.

Section 11: Typical Credit Exposures

Gain insights into typical credit exposures, models for credit exposure assessment, and the influence of credit spreads and interest rates on credit exposures.

Section 12: Netting and Netting Factor

Explore the nuances of netting and netting factors, understanding how these elements impact the quantification and mitigation of credit exposure within financial transactions.

Section 13: Quantifying CCE II

This section delves deeper into the quantification of Credit Conversion Factor (CCE), exploring its impact on collateral and volatility, providing learners with a nuanced understanding of advanced risk assessment techniques.

Section 14: Credit Risk and Credit Derivatives

Examine the relationship between credit risk and credit derivatives, exploring market growth, and understanding the linkage between bonds and credit derivatives in financial markets.

Section 15: Credit Default Swaps – Detailed

This section provides a detailed exploration of Credit Default Swaps (CDS), covering reference entities, delivery squeeze, and the associated risks involving big and small banks.

Section 16: Estimating Default Probability

Explore methodologies for estimating default probability, the cumulative default probability function, and gain insights into CDS index products and collateralized debt obligations.

Section 17: Pricing Counterparty CR

Understand the motivation behind pricing counterparty credit risk, learn practical CVA formulas, and explore pricing mechanisms for new trades using CVA, enhancing your ability to make informed financial decisions.

Section 18: Bilateral CVA and Three Different CVA Measures

Explore the complexities of bilateral CVA, and delve into three distinct CVA measures, gaining a comprehensive understanding of bilateral counterparty risk and its measurement.

Section 19: Pricing a CR – Wrong Way Risk

Uncover the intricacies of wrong-way risk and right-way risk in pricing counterparty credit risk, understanding how these factors impact financial decision-making processes.

Section 20: Counterparty Risk in CDSs

Gain insights into counterparty risk associated with Credit Default Swaps (CDSs), explore the use of hazard rates in CDS protection, and understand the role of credit indices and index tranches.

Section 21: Counterparty Risk and Gap Risk

Explore the conversion of counterparty risk into gap risk, understand how to hedge risky mark-to-market positions, and delve into loss distribution, unexpected loss, portfolio models, and economic capital.

Section 22: CR Regulation and Basel II

Understand the regulatory landscape surrounding counterparty credit risk, with a specific focus on Basel II, exploring advanced approaches and requirements for effective risk management.

Section 23: Exposure at Default & Basel II

Explore Exposure at Default (EAD) within the context of Basel II, understand the current exposure method, and gain insights into managing counterparty risk in the financial institution.

Section 24: Trading Desk Approach

Delve into the trading desk approach for managing counterparty risk, understanding the responsibilities involved, exploring insurance approaches, and gaining insights into effective risk management within the trading desk environment.

Section 25: The Role of CCPs

Explore the crucial role of Central Counterparties (CCPs) in mitigating counterparty risk, understanding the concept of triple-A counterparties, and gaining insights into exchange and CCP concepts, providing a comprehensive view of market coverage by CCPs.

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