2024 Curriculum CFA Program Level I Fixed Income
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Credit analysis plays a critical role in fixed-income markets. Proper evaluation and pricing of credit risk facilitates the efficient allocation of capital. This is a dynamic process as credit risk components are continuously re-evaluated and fixed-income instruments repriced according to market conditions. This learning module covers the basic principles of credit analysis. First, we introduce the concepts of credit risk and expected loss and interpret what credit ratings mean. We compare bond issuer creditworthiness within a given industry as well as across industries, and we explore how financial markets price credit risk. This lesson focuses primarily on the analysis of credit risk, while subsequent lessons discuss credit analysis of sovereign and non-sovereign government issuers as well as corporate debt.