Credit Risk Analysis Course

Lesson 1 • The Credit Lifecycle

Traces a credit facility from origination through repayment or default. Connects process stages to risk events analyzed later in the course.

Lesson 2 • Key Stakeholders in Credit Markets

Identifies lenders, borrowers, guarantors, and regulators and their incentives. Provides context for understanding risk-taking behavior throughout the course.

Lesson 3 • Defining Credit Risk and Its Scope

Establishes precise definitions of credit risk, default, and loss. Anchors all subsequent analysis in shared terminology and conceptual boundaries.

Lesson 1 • Spreading and Normalizing Financials

Standardizes multi-year financials for trend and peer comparison. Produces the adjusted data inputs used in ratio analysis and modeling.

Lesson 2 • Cash Flow Analysis

Prioritizes cash flow over accrual earnings for debt serviceability assessment. Demonstrates why free cash flow is the primary repayment source.

Lesson 3 • Reading the Income Statement

Focuses on revenue quality, margin trends, and interest coverage as credit signals. Builds the analytical habit of questioning reported earnings.

Lesson 4 • Identifying Accounting Red Flags

Trains analysts to detect manipulation, aggressive policies, and disclosure gaps. Directly reduces the risk of lending based on misleading financials.

Lesson 1 • Liquidity and Working Capital Ratios

Assesses short-term solvency through current, quick, and cash ratios. Identifies liquidity risk that may precede default even for profitable firms.

Lesson 2 • Ratio Trend Analysis and Scoring

Combines multiple ratios into a directional trend view and simple scoring framework. Prepares students for the quantitative credit scoring models in Chapter 5.

Lesson 3 • Coverage and Serviceability Ratios

Quantifies a borrower's ability to service debt from earnings and cash flow. Links coverage ratios to covenant design covered in later chapters.

Lesson 4 • Industry Benchmarking Techniques

Contextualizes ratios within sector norms and business model differences. Prevents misclassification of risk due to industry-specific capital structures.

Lesson 1 • Environmental and Operational Risk Factors

Identifies regulatory, reputational, and operational risks that affect debt repayment capacity. Integrates non-financial risk into the overall credit assessment.

Lesson 2 • Industry and Competitive Analysis

Applies structured frameworks to assess industry attractiveness and competitive intensity. Grounds financial ratios in the business environment that generates them.

Lesson 3 • Business Model and Strategy Evaluation

Assesses revenue model sustainability, diversification, and strategic coherence. Identifies business model risks that financial statements alone cannot reveal.

Lesson 4 • Management and Governance Quality

Evaluates leadership experience, board oversight, and ownership structure as credit factors. Recognizes that governance failures are a leading cause of unexpected defaults.

Lesson 1 • Statistical Credit Models

Covers logistic regression, discriminant analysis, and survival models for default prediction. Connects statistical outputs to practical credit decision thresholds.

Lesson 2 • Model Validation and Performance Testing

Applies discrimination, calibration, and stability tests to assess model reliability. Ensures models remain predictive as economic conditions change.

Lesson 3 • Principles of Credit Scoring

Explains the logic of scoring models, variable selection, and score-to-default mapping. Establishes the theoretical basis for all model types covered in this chapter.

Lesson 4 • Behavioral and Application Scoring

Distinguishes application scoring at origination from behavioral scoring during the credit lifecycle. Applies both to portfolio monitoring and early warning systems.

Lesson 1 • Credit Documentation Essentials

Reviews key provisions in loan agreements, security documents, and intercreditor arrangements. Prepares analysts to identify documentation gaps that increase credit risk.

Lesson 2 • Pricing Credit Risk

Calculates risk-adjusted pricing using cost of funds, expected loss, and return targets. Demonstrates how pricing decisions reflect the credit assessment performed earlier.

Lesson 3 • Collateral and Security Structures

Evaluates collateral types, valuation methods, and perfection requirements. Quantifies the loss mitigation effect of security on expected loss.

Lesson 4 • Facility Types and Their Risk Profiles

Compares term loans, revolving facilities, letters of credit, and trade finance instruments. Matches facility type to borrower need and risk profile.

Lesson 1 • Portfolio Concentration and Diversification

Measures single-name, sector, and geographic concentration and their impact on portfolio loss. Introduces diversification as a primary risk mitigation tool.

Lesson 2 • Credit Correlation and Contagion

Explains how default correlation amplifies portfolio losses beyond individual borrower risk. Connects correlation concepts to stress testing and capital allocation.

Lesson 3 • Credit Risk Limits and Appetite Frameworks

Designs a limit structure aligned with the institution's risk appetite and capital base. Demonstrates how limits translate strategy into operational credit decisions.

Lesson 4 • Loan Loss Provisioning and Impairment

Applies expected credit loss provisioning standards to stage loans and calculate allowances. Connects provisioning to financial reporting and regulatory compliance.

Lesson 1 • Credit Risk Mitigation Techniques

Evaluates netting, collateral agreements, credit derivatives, and securitization as risk transfer tools. Assesses residual and counterparty risks introduced by mitigation.

Lesson 2 • Scenario Design and Macro Linkages

Constructs adverse and severely adverse macroeconomic scenarios and links them to credit parameters. Translates macro shocks into borrower-level PD and LGD changes.

Lesson 3 • Stress Testing Fundamentals

Defines stress testing objectives, scenario types, and governance requirements. Positions stress testing as a forward-looking complement to historical credit analysis.

Lesson 4 • Integrating Stress Results into Decisions

Translates stress test outputs into capital planning, limit adjustments, and strategic decisions. Closes the loop between risk measurement and risk management action.