This eCourse consists of two modules. Module 1 introduces the concept of credit risk mitigation and outlines the two broad categories of mitigation - funded and unfunded. The benefits of mitigation are described, and its impact on expected loss is demonstrated. The module also discusses the taking and management of mitigation, the different types of mitigant used, and the various risks associated with credit risk mitigation.
Module 2 discusses the use of collateral (or security) as a credit risk mitigant, describing the motivations for collateral usage from the point of view of collateral takers and providers. The module also examines the increasingly important and ever-evolving role of a bank's collateral management function. Finally, the module describes the various types of collateral taken as security and the attractions/drawbacks of each as a credit risk mitigant.
On completion of this course, you will be able to:
- Define the concept of credit risk mitigation (CRM) and recognize the benefits of taking mitigation
- Identify the main risks associated with taking mitigation
- Recognize the various uses of collateral and the motivations for providing and taking collateral
- Identify the various forms of collateral that can be used to reduce credit risk exposure
Module 1: Credit Risk Mitigation - An Introduction
Topic 1: Overview of Mitigation
Topic 2: Risks of Mitigation
Module 2: Credit Risk Mitigation - Collateralization
Topic 1: Overview of Collateral
Topic 2: Types of Collateral