Learning Outcome Statements

1. Modeling credit risk and the credit valuation adjustment

a. explain expected exposure, the loss given default, the probability of default, and the credit valuation adjustment;

2. Credit scores and credit ratings

b. explain credit scores and credit ratings;

c. calculate the expected return on a bond given transition in its credit rating;
3. Structural and reduced form credit models

d. explain structural and reduced-form models of corporate credit risk, including assumptions, strengths, and weaknesses;

4. Valuing risky bonds in an arbitrage-free framework

d. explain structural and reduced-form models of corporate credit risk, including assumptions, strengths, and weaknesses;

5. Interpreting changes in a credit spread

e. calculate the value of a bond and its credit spread, given assumptions about the credit risk parameters;

6. The term structure of credit spreads

g. explain the determinants of the term structure of credit spreads and interpret a term structure of credit spreads;

7. Credit analysis for securitized debt

h. compare the credit analysis required for securitized debt to the credit analysis of corporate debt.