Credit Risk Modeling: Build Credit Risk Model from Scratch
Learning Path | 3 Course Series

Credit Risk Modeling - Build a Credit Risk Model from Scratch provides a clear, structured introduction to identifying, assessing, and managing credit risk. The course defines credit risk as the chance of incurring a loss when a borrower is unable to meet loan repayments or fulfill agreed-upon financial obligations. This risk appears across various situations—whether a bank issues loans, a company extends credit to customers, a bond issuer fails to pay at maturity, or an insurer cannot meet its claim commitments. Higher credit risk often translates into higher borrowing costs, making accurate evaluation essential for long-term financial stability.

This program explains why credit risk modeling is particularly relevant to IT organizations and demonstrates the analytical methods used to evaluate a firm's financial health. It covers a wide range of core concepts, including financial statement derivations, the Altman Z-Score Model, Merton's Model, working capital analysis, and UFCE modeling. Learners also explore Way Out Analysis for IT companies, key evaluation metrics, and the process of forming a well-supported final recommendation.

The course begins by introducing the foundations of credit risk measurement, ensuring learners understand the risk landscape before moving into more advanced modules. It then examines traditional credit models, supported by practical examples that clarify their real-world application. The curriculum also delves into structural credit risk models, demonstrating how theoretical concepts translate into practical credit assessments.

Participants learn how to calculate and interpret the Altman Z-score, including industry-specific applications such as evaluating the financial position of U.S. airline companies. The program further covers credit ratings, credit modeling techniques, evaluation metrics, and early-warning indicators. Additional modules focus on UFCE and working capital credit modeling, along with a detailed review of financial statements—income statement, balance sheet, and cash flow statement.

The training concludes with an in-depth look at Way Out Analysis and internal rating frameworks, supported by reference materials that guide learners in applying the concepts independently. This course is designed to be hands-on, and its effectiveness increases when participants actively engage with the exercises and examples provided.

• Participants should have a fundamental understanding of finance and accounting concepts.
• Basic familiarity with financial statements, such as the balance sheet and income statement, is recommended.
• A general awareness of lending, credit, or risk management concepts will help improve understanding of the course content.

• Finance and accounting students can build a solid foundation in credit risk modeling, gaining practical skills that boost job prospects and prepare them for consultancy roles.
• Professionals in finance, including analysts and investment bankers, can strengthen their skills by mastering the creation and assessment of sophisticated credit risk models, making this course a valuable step for career advancement.