Credit Derivatives and Credit Structured Products

Course Outline

The objective of this two day workshop is to familiarize participants with the products, trading conventions, pricing models and applications of credit derivative products as well as structured debt products. Products covered include Credit Default Swaps, Total Return Swaps, Credit Linked Notes and CDOs.

Discussions on hedging and investments will be held across case studies and scrutinized in light of the current global banking crisis including sovereign debt issues.

Who The Course is For

The programme is relevant to a wide range of market participants including:

  • Traders
  • Loan officers
  • Risk managers
  • Fixed income professionals
  • Corporate bankers
  • Regulators
  • Investors and fund managers

Tell a colleague about this course

Prior Knowledge

Participants are expected to have a general knowledge of the capital markets and derivatives products.


This program is eligible for 16 Continuing Education credit hours from the CFA Institute. If you are a CFA Institute member, CE credit for your participation in this program will be automatically recorded in your CE Diary.


photos Brochure with Booking Form   |   Register to Receive Updates

Day One

Credit Derivatives

Introduction to Credit Derivative Products

  • Credit Default Swaps
    • Mechanics and Structuring of single name and Index CDS
    • Issues: Reference Entities, Definition of Credit Event, Settlement
  • Pricing a single name CDS
    • Actuarial Methods
    • Spread induced Methods
    • Equity Pricing Methods / KMV
  • Basket and “nth to Default” CDS – Mechanics
    • Discussin on Default correlation Issues
  • Total Rate of Return Swaps
  • Credit Spread Forward Contracts
  • Credit Spread Options contracts
  • Counterparty Risk in CDS – correlation between Underlying Default and Counterparty Default

Standardized ISDA Contracts for Credit Derivatives

  • The ISDA Standard CDS Model
  • Variations on CDS contracts and other credit derivatives

Pricing and Hedging Credit Derivatives

  • Example of hedging a sovereign CDS

Day Two

Structured Credit Products

Credit Linked Notes – Structuring and Applications

  • Asset Backed Securities vs CDO Tranches

CDOs – Mechanics, Structuring Issues, Risk Transfer Applications

  • Balance Sheet CDOs
  • Arbitrage CDOs
  • Synthetic CDOs
  • Static vs. Managed CDOs

Exotics

  • AB- CDOs
  • CDO2, CDO3
  • CPDOs (constant Proportional Debt Obligations)

Pricing CDOs

  • Rating Based Methods
  • Dealing with Default correlations via Copula Functions
  • The “Contigent Leg Pricing Method”
  • The “Fee Leg Pricing Method”
  • Numeric Examples
  • Dealing with Implied correlations
  • Portfolio effects and the Value of Diversification – Discussion in light of lessons learned from the crisis in 2008

Hedging CDO Exposure

Conclusions and Discussions

Copyright © London Financial Studies