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CREDIT AND COUNTERPARTY RISK MANAGER CERTIFICATE

CANDIDATE GUIDEBOOK

The Industry Standard for Credit Risk Practitioners

CREDIT AND COUNTERPARTY RISK MANAGER CERTIFICATE CANDIDATE GUIDEBOOK The Industry Standard for Credit Risk Practitioners

EXECUTIVE SUMMARY

Credit risk is traditionally defined as the risk that an obligor will not be able to

Credit risk is traditionally defined as the risk that an obligor will not be able to honor its (often long-dated) obligations, and has mostly been applied to the fixed income world and, more specifically, to bank lending. It is binary in nature on a single asset that either defaults or does not default, and the consideration of portfolio effects is always crucial for risk analysis. More recently, the nature of what is being considered credit risk has changed; nowadays, deterioration in credit quality short of a default is often considered part of credit risk, and derivative

counterparty risk has become much more important. The particularity of the latter is that it operates on a time-varying notional (e.g. consider an interest rate swap or an FX forward where one counterparty owes the other one money, depending on market movements) and is highly dependent on correlations.

The Credit and Counterparty Risk Manager (CCRM) Certificate is relevant to all risk-related roles in financial services, in particular Credit Risk Staff, Financial Controllers, Operations and Technology Managers, and Compliance and Legal Officers.

The Credit and Counterparty Risk Manager exam consists of 60 questions. The syllabus is based on the PRMIA Credit and Counterparty Risk Manager Handbook.

Enrollment for the program is via the PRMIA website, and taking the exam is designed to suit the needs of the busy risk professional. Be sure to read this entire document to view important information that will help you to be a successful candidate.

We hope that you will join us in promoting the CCRM program as the standard for our industry and that you will join in our efforts to ensure that it will continue to meet the needs of our members and our industry.

CONTENTS

  • 1 EXECUTIVE SUMMARY

  • 2 PROGRAM DESIGN

  • 2 PROGRAM DATES AND LOCATIONS

  • 3 FEES AND REGISTRATION

  • 3 TAKING THE CREDIT AND COUNTERPARTY RISK MANAGER EXAM

  • 5 CREDIT AND COUNTERPARTY RISK MANAGER SYLLABUS

  • 6 PREPARING FOR THE CREDIT AND COUNTERPARTY RISK MANAGER EXAM

EXECUTIVE SUMMARY Credit risk is traditionally defined as the risk that an obligor will not be

PROGRAM DESIGN

DESIGN RATIONALE

The Credit and Counterparty Risk Manager Certificate program was created at the instigation of PRMIA members holding senior positions in the industry who felt there was a gap in the market. It has been designed by industry leaders, all PRMIA members.

PRMIA CCRM is designed to deliver a deep, practical understanding of credit risk analysis frameworks and how to deploy them and act on them in practice in financial institutions. Successful candidates will be better prepared to implement meaningful risk assessment initiatives, produce useful risk manage- ment information and understand the key modeling techniques for credit risk measurement. In addition,

they must commit to further uphold the highest professional and ethical standards as defined by the PRMIA Standards of Best Practice, Conduct and Ethics.

PROGRAM DESIGN DESIGN RATIONALE The Credit and Counterparty Risk Manager Certificate program was created at the

READING MATERIAL

PRMIA Credit and Counterparty Risk Manager Handbook

KEY LEARNING OBJECTIVES

Those who pass the CCRM exam will be able to:

Understand the different sources from where credit risk can arise

Understand how different definitions of credit risk leads to different results

Design a coherent framework for credit and market risk with neither risks left out nor double counting

Understand which level of analysis is appropriate for which institution

Understand risk mitigation – how it works, what the residual risks are, and how it should be included within the models

Qualitatively understand the impact of the different risk drivers and validate the model results using back-of-the-envelope calculations

Understand the high level software and system implications of the different modeling choices

PROGRAM DATES AND LOCATIONS

For your convenience, the exam is offered on every business day of the year.

You may request to schedule your exams at any time. There is no advantage to taking your exams on any particular date. Questions within exams are drawn from a large database of questions and are administered randomly, creating thousands of unique exam forms, all of comparable difficulty.

PRMIA uses the services of VUE, part of the Pearson Publishing family, to administer the CCRM exams. Pearson VUE is a professional testing firm that has approximately 6,000 testing centers in more than 170 countries around the world.

Please note some important details about registration, cancellation, identification requirements and space availability in the Registration section found on page 3 and 4.

FEES AND REGISTRATION REGISTRATION FEES Registration for the Credit and Counterparty Risk Manager involves enrolling in
FEES AND REGISTRATION
REGISTRATION
FEES
Registration for the Credit and Counterparty Risk
Manager involves enrolling in the program.
Enroll via this link:
Fees, relevant to your membership status, are given at
www.prmia.org/ccrm
www.prmia.org/ccrm
A digital copy of the CCRM Handbook is
included with the program fee.
Payment by credit card is required for online
purchases. Contact certification@prmia.org to
make alternative arrangements.
After you enroll and pay the program fee, an
authorization to test email will be provided to you to
schedule your exam at the center, date and time of
your choice.
PRMIA Sustaining Members receive a
discount on the program fee. Become a
Sustaining Member online at
90 DAY RULE
www.prmia.org/membership
If you are interested in adopting the CCRM
Certificate as a corporate program, please
contact membership@prmia.org. Special
pricing on program fees and preparatory
materials may be available to your company.
Please note that there is a strict PRMIA policy that exams may
NOT be retaken within 90 days of a prior sitting. Any candidate
attempt to transgress this policy by whatever means may result in
penalties against the candidate which could include forfeit of any
PRMIA certifications, fees, and possible expulsion from PRMIA.

TAKING THE CREDIT AND COUNTERPARTY RISK MANAGER EXAM

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EXAM FORMAT The exams are computer-based. You will not receive any copies of the questions. No
EXAM FORMAT
The exams are computer-based. You will not receive any copies of
the questions. No paper may be brought into the testing center;
however, you will be provided with an erasable board upon request.
PERSONAL IDENTIFICATION
Once admitted to the testing room, there will be a tutorial that intro-
duces the functionality of the exam and a brief message from PRMIA.
After this has been viewed, you may begin your exam. You will be
asked multiple-choice questions with four possible responses. There
are no breaks allowed during the exam. The testing system allows
you to mark and review questions as long as time is remaining.
On the date of your appointment,
arrive at the testing center at least
15 minutes before the scheduled
start time. You must bring two
forms of identification with you.
The first must be a current
government-issued ID with your
photograph and signature.
Please note that you are unlikely to finish
your exams with substantial extra time.
You are encouraged to use the tutorial in
an expedient manner, but sufficient time is
allocated for you to complete the tutorial
and the exam.
Examples of Acceptable Forms of Government Issued ID
Driver’s License
Passport
National Identity Card
Military ID
Examples of Acceptable Forms of Supplemental ID
■ Credit Card
■ Employee ID Card
Examples of Unacceptable Forms of ID
■ Library Card
■ Social Security Card
ARRIVE ON TIME It is very important that you leave enough time to arrive at the
ARRIVE ON TIME
It is very important that you leave enough time
to arrive at the testing center early.
Candidates that arrive late to the test center
may not be permitted to test. The full charge
for the exam will be made if you are not
admitted for any reason. As these centers
offer exams for other organizations as well,
not everyone in the room will be taking the
same exam, so no assumptions should be
made about when other candidates enter
or leave the testing center.
EXAMINATION ADMINISTRATION
Each testing center has an administrator who can assist candidates
with any questions that they may have. In the event of any incident
(computer failure, inadequate supplies, excessive noise, or any other
circumstance) which the candidate believes is not compatible with
good examination conditions, this must be brought to the attention of
the examination proctor immediately upon the incident being noticed
— without continuing the exam. Failure to inform the proctor in this
manner will invalidate any subsequent candidate incident reporting
which cannot be substantiated by the test center.
Your exam results should be available within 15 business days of your
test date and will be delivered to you via the PRMIA website which
you can access by logging in to the PRMIA website. You will find the
results within "My Profile."
ARRIVE ON TIME It is very important that you leave enough time to arrive at thewww.pearsonvue.com/prmia . Pl ease note that all change requests must be made at least one business day before the testing date or the entire exam fee will be forfeited. Because of the flexibility in rescheduling, exam fees are non-refundable. EXAM SECURITY The Credit and Counterparty Risk Manager exam is conduct- ed under secure conditions. Any attempt by candidates to copy questions, by any means includ- ing unorganized memorizing, and to distribute these questions to other individuals, will be treated as unethical behavior and may result in penalties against the candidate which could include forfeit of any PRMIA certifications, fees, and possible expulsion from PRMIA. Indictment to copy, and usage of copied questions may also result in the same penalties. CALCULATORS An online scientific calculator, Texas Instrument TI308XS, is part of the test delivery system. No other materials may be brought into the exam room with you. It is suggested that candidates purchase the hand-held version (TI-30XS) to fully familiarize themselves with the calculator. 4 " id="pdf-obj-4-4" src="pdf-obj-4-4.jpg">

CANCELLATIONS/CHANGES

In recognition of the busy and changing schedules of risk managers, you may change your exam appointment without charge through the Pearson Vue system at www.pearsonvue.com/prmia. Please note that all change requests must be made at least one business day before the testing date or the entire exam fee will be forfeited.

Because of the flexibility in rescheduling, exam fees are non-refundable.

EXAM SECURITY

The Credit and Counterparty Risk Manager exam is conduct- ed under secure conditions. Any attempt by candidates to copy questions, by any means includ- ing unorganized memorizing, and to distribute these questions to other individuals, will be treated as unethical behavior and may result in penalties against the candidate which could include forfeit of any PRMIA certifications, fees, and possible expulsion from PRMIA. Indictment to copy, and usage of copied questions may also result in the same penalties.

ARRIVE ON TIME It is very important that you leave enough time to arrive at thewww.pearsonvue.com/prmia . Pl ease note that all change requests must be made at least one business day before the testing date or the entire exam fee will be forfeited. Because of the flexibility in rescheduling, exam fees are non-refundable. EXAM SECURITY The Credit and Counterparty Risk Manager exam is conduct- ed under secure conditions. Any attempt by candidates to copy questions, by any means includ- ing unorganized memorizing, and to distribute these questions to other individuals, will be treated as unethical behavior and may result in penalties against the candidate which could include forfeit of any PRMIA certifications, fees, and possible expulsion from PRMIA. Indictment to copy, and usage of copied questions may also result in the same penalties. CALCULATORS An online scientific calculator, Texas Instrument TI308XS, is part of the test delivery system. No other materials may be brought into the exam room with you. It is suggested that candidates purchase the hand-held version (TI-30XS) to fully familiarize themselves with the calculator. 4 " id="pdf-obj-4-19" src="pdf-obj-4-19.jpg">

CALCULATORS

An online scientific calculator, Texas Instrument TI308XS, is part of the test delivery system. No other materials may be brought into the exam room with you. It is suggested that candidates purchase the hand-held version (TI-30XS) to fully familiarize themselves with the calculator.

CREDIT AND COUNTERPARTY RISK MANAGER CERTIFICATE SYLLABUS

Credit Risk

Chapter 1 — Classic Credit Products

Important Credit Instruments Building Blocks Instruments

Chapter 2 — Classic Credit Life Cycle Introduction/Basics Origination Phase Credit Risk Assessment Monitoring Phase Workout Phase Other Considerations

Chapter 3 — Classic Credit Risk Methodology

Introduction and Setting the Scene Fundamental Credit Analysis Analyzing Wholesale Credit Analyzing Retail Credit

Conclusion: Classic vs. Modern Credit Analysis Methodologies

Chapter 4 — Credit Derivatives and Securitization

Structured Credit as A Funding Tool Linear Credit Risk Transfer Structured Credit as a Risk Management Tool Bespoke Structured Credit

Chapter 5 — Modern Credit Risk Modeling

Credit Risk Parameters Credit VaR Models Implementation Modeling Credit Risk Mitigation

Risk Allocation and Performance Management

Chapter 6 — Credit Portfolio Management (CPM)

CPM Goals and Philosophy CPM Instruments CPM Analytics CPM in Practice

Counterparty Risk Chapter 7 — Basics of Counterparty Risk ■ ■ ■ ■ Historical Perspective The
Counterparty Risk
Chapter 7 — Basics of Counterparty Risk
Historical Perspective
The OTC Derivative Market
Exposure Measurement
Risk Appetite
Chapter 8 — Risk Mitigation
Documentation
Netting
Collateral
Clearing
Compression
Guarantees, Intermediation,
and Credit Insurance
Chapter 9 — Credit Valuation Adjustment, CVA
CVA Definition and Calculating CVA
Debit Valuation Adjustment, DVA
Wrong-way Risk
Organizational Challenge
Chapter 10 — CVA-related Aspects —
Toward XVA
Funding Valuation Adjustment, FVA
Capital
Leverage Ratio
Liquidity Ratios
Chapter 11 — Managing Counterparty Risk
and CVA
Hedging CVA
Central Clearing Counterparties (CCP)
Managing Distressed Names and Defaults

SYLLABUS SUMMARY

   

Number of Questions in the Exam

Chapter

 

1

Classic Credit Products

6

11%

2

Classic Credit Life Cycle

5

7%

3

Classic Credit Risk Methodology

7

16%

4

Credit Derivatives and Securitization

7

15%

5

Modern Credit Risk Modeling

7

15%

6

Credit Portfolio Management

6

8%

7

Basics of Counterparty Risk

4

5%

8

Risk Mitigation

4

5%

9

Credit Valuation Adjustment (CVA)

6

7%

1

0

CVA-related Aspects — Toward XVA

4

6%

1

1

Managing Counterparty Risk and CVA

4

5%

Total

60

100%

Percentage of the Exam

CVA-related Aspects — Toward XVA Risk Mitigation Credit Valuation Managing Counterparty Risk and CVA Methodology Classic
CVA-related Aspects —
Toward XVA
Risk Mitigation
Credit Valuation
Managing Counterparty
Risk and CVA
Methodology
Classic Credit Risk
Management
Credit Portfolio
Risk Modeling
Modern Credit
Counterparty Risk
Basics of
and Securitization
Credit Derivatives
Classic Credit Products
16%
15%
15%
11%
8%
Adjustment (CVA)
Classic Credit Life Cycle
6%
5%
5%
5%
7%
7%
SYLLABUS SUMMARY Number of Questions in the Exam Chapter 1 Classic Credit Products 6 11% 2

PREPARING FOR THE EXAM

REQUIRED RESOURCE

PRMIA Credit and Counterparty Risk Manager Handbook

This guidebook will lead you through the main study points of the exam. The Credit and
This guidebook will lead you through the main study points of the exam.
The Credit and Counterparty Risk Manager Handbook is a best practices guide to all
elements needed for the successful implementation of an effective risk management
framework and the management of credit risk. Designed to deliver a deep, practical
understanding of credit risk analysis and management, risk management frameworks
and measurement methodologies in financial institutions, the Handbook is written by
an all-practitioner author team from major financial institutions around the globe.

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