Faculty Business Management Sciences and Economics

Department Finance and Accounting

Module Name Credit Risk and Financial Analytics
Module Code ACCN 303
Lecturer Mr E. Mundingi
Office 140
Consultation Times By appointment

Email address emundingi@commerce.uz.ac.zw

1.0 Purpose of the Module

This module equips students with the ability to analyses data to make an informed decision and
predict insights. Students are equipped with the requisite skills in analyzing data by blending
statistical tools with complex machine learning tools and algorithms and will be able to fit in the
modern technological business world.

2.0 Aim of the Module

The module aims to equip students with informed credit risk decision-making. This is made
possible through effective analysis of financial information available to decision-makers.
3.0 Learning outcomes

The student should be able to evaluate whether or not to engage in a lending endeavor given the
probability of loss attached to the loan and the loss to be borne should the default occur.

4.0 Learning outputs

The student should be able to create algorithms that show the potential losses associated with a
decision. The student should be able to create models that predict the probability of default, the
exposure at default, and the loss-given default.

5.0 Teaching and learning activities

The module is organized and taught using a combination of lectures, presentations, research, and
discussions. The lecturer facilitates the lectures, the class engages in research, and the students
will present their findings in class presentations. During all lectures, students are expected to
participate in analytical class discussions and presentations on assigned class activities.

6.0 Module Content

6.1 Introduction to Credit Risk

o Definition of Credit Risk

o Asymmetrical information problem
o Types of credit risk

6.2 Principles for Credit Risk Management

o Establishing an appropriate credit risk environment

o Sound credit granting process
o Appropriate credit administration, measurement, and monitoring process
o Ensuring adequate controls over credit risk

6.3 Financial analysis for Credit Risk Management

o Income Statement Analysis

o Sustainability of revenues
o Sustainability of profits
o Industry analysis
 o Analysis of Financial Position
o Business Analysis Models
o Industry Analysis Models
o Future relevance of business

6.4 Credit analysis

o Measures of Credit Risk

o Credit Scoring
o Credit Rating
o Structural Models
o Reduced form Models

6.5 Pricing Credit Risk

o Credit Risk pricing Models

o Risk based pricing
o Credit Value Adjustment

6.6 Modelling Credit Risk

o Excel
o Matlab
o Python
o Models for Credit Risk Management

7.0 Student Assessment

The module is assessed through continuous assessment and a written examination at the end
of the module usually, administered at the end of the block. The module is marked out of 100
marks with the following breakdown:

a. Continuous assessment shall constitute 50% of the final assessment.

b. The written examination shall constitute 50% of the final assessment.
c. No plagiarism in assignments and presentations.
8.0 Recommended Reading Material

1. Bolder, D. J. (2018). Credit-Risk Modelling. Cham: Switzerland.

2. Carlone, G. (2021). Introduction to Credit Risk. Taylor and Francis.
3. Doumpos, M., Lemonalis, C., Niklis, D., & Zopounidis, C. (2019). Analytical
Techniques in Assessment of Credit Risk: An Overview of Methodologies and
Applications. Cham: Springer.