| Unit name | Credit Risk |
|---|---|
| Unit code | ACFIM0046 |
| Credit points | 20 |
| Level of study | M/7 |
| Teaching block(s) |
Teaching Block 2 (weeks 13 - 24) |
| Unit director | Professor. Hill |
| Open unit status | Not open |
| Units you must take before you take this one (pre-requisite units) |
None |
| Units you must take alongside this one (co-requisite units) |
None |
| Units you may not take alongside this one |
None |
| School/department | School of Accounting and Finance - Business School |
| Faculty | Faculty of Social Sciences and Law |
Why is this unit important?
The unit will combine examination of leading academic papers in the credit ratings literature with practical sessions in which students build their own credit scoring models. We also employ an industry-based model for determining portfolio credit risk (Credit Metrics) and all material has been provided by the authors of the Credit Metrics system. The unit will be supported by computer lab workshops based in SAS software and this is also an opportunity for students to learn about a leading data analysis software system. All theoretical work is linked directly to practical sessions, thereby helping students to understand not just the theory, but also the relevance of this theory in practice.
How does this unit fit into your programme of study
This course has an empirical focus to help support students during their dissertation. It complements the course in Banking and follows on from the courses in asset pricing (bonds) and corporate finance (capital structure) to understand a major source of risk in capital markets, which is primarily related to debt instruments.
An overview of content
This unit will cover credit risk, hazard models, the Merton (1974) model, credit ratings and portfolio credit risk via CreditMetrics. We employ SAS software in both lectures and workshops. A new cloud-based version of SAS will be available for 2024/2025.
How will students, personally, be different as a result of the unit
This course allows students to apply the theory they learn to devising their own models of credit risk. Students will learn how to devise credit risk models based on both academic and industry practices. They will learn how to use SAS software for this purpose.
Learning Outcomes
On completion of the unit students will be able to
(a) Construct models for the evaluation of the credit risk of individual corporations and instruments, following leading academic papers.
(b) Construct a ratings-based credit scoring model.
(c) Apply the Credit Metrics method to determine portfolio credit risk.
The learning approach is interactive and applied. Student feedback suggests that students welcome the chance to put the theoretical material into practice as this considerably enhances their understanding of the material.
Tasks which help you learn and prepare you for summative tasks (formative):
Tasks which count towards your unit mark (summative):
The unit is assessed via a 1.5 hour examination (50% of the final mark) and group coursework, maximum four sides of A4 paper in Times New Roman 12 font (50% of the final mark).
The exam will require students to demonstrate their knowledge and understanding of credit risk and the theory behind the empirical models designed to measure credit risk. The exam will contain a combination of qualitative and quantitative questions, which will require students to demonstrate that they understand the various models that are used to quantify credit risks (ILO1, ILO2, ILO3, ILO4). In addition, the exam will test the students’ ability to think critically and communicate effectively in writing under exam conditions.
In the assessed coursework, students work in teams to devise their own credit scoring models and critically evaluate them against models reported in prior literature (ILO1, ILO2, ILO4, ILO5).
When assessment does not go to plan
A resit exam will be based on the same ILOs as the first sit (ILO1, ILO2, ILO3, ILO4). The resit coursework will be single rather than groupwork and will require students to devise a model and critically evaluate it (ILO1, ILO2, ILO4, ILO5).
If this unit has a Resource List, you will normally find a link to it in the Blackboard area for the unit. Sometimes there will be a separate link for each weekly topic.
If you are unable to access a list through Blackboard, you can also find it via the Resource Lists homepage. Search for the list by the unit name or code (e.g. ACFIM0046).
How much time the unit requires
Each credit equates to 10 hours of total student input. For example a 20 credit unit will take you 200 hours
of study to complete. Your total learning time is made up of contact time, directed learning tasks,
independent learning and assessment activity.
See the University Workload statement relating to this unit for more information.
Assessment
The assessment methods listed in this unit specification are designed to enable students to demonstrate the named learning outcomes (LOs). Where a disability prevents a student from undertaking a specific method of assessment, schools will make reasonable adjustments to support a student to demonstrate the LO by an alternative method or with additional resources.
The Board of Examiners will consider all cases where students have failed or not completed the assessments required for credit.
The Board considers each student's outcomes across all the units which contribute to each year's programme of study. For appropriate assessments, if you have self-certificated your absence, you will normally be required to complete it the next time it runs (for assessments at the end of TB1 and TB2 this is usually in the next re-assessment period).
The Board of Examiners will take into account any exceptional circumstances and operates
within the Regulations and Code of Practice for Taught Programmes.
