I – Key principles of Basel II
How the regulations came about
- The Basel Committee and national regulatory authorities
- Key dates
Introduction
- Basel I and the Cooke ratio
- From Basel I to Basel II: objective of the reform
- The Basel approach to risk:
- Counterparty risk
- Operational risk, and
- Market risk
- The three pillars of Basel II
- the Basel II solvency ratio
II – Credit risk management tools
Basel parameters and credit risk measurements
- The four indicators: PD, LGD, EAD and CCF
- Expected and unexpected losses (EL and UL)
- Methods
- Overview of risk calculation methods
- Standard approach
- IRB approach: general principles
Exercises:
- Counterparty risk calculation methodology
- Standard approach: examples and illustrations
- IRB approach: examples and illustrations
Conclusion: Basel II in a crisis environment
