Credit Derivatives

Course Overview

At the end of this seminar delegates will be familiar with the basic credit derivatives, their raison d’être, structures and pricing factors.

They will appreciate the risks transferred by these products (and the residual risks that are not).
In addition, delegates will appreciate the uses of credit derivatives for corporate financing structures and the circumstances in which they might be utilised for hedging risk, both from a client standpoint and from that of the corporate banker.

Course Content

Overview

• Historical development
• Current diversity & expected growth
• Market size
• The participants

Reasons for the Creation & Development of the Credit Derivative Market

• Need for investment uplift
• Greater awareness of credit risk
• Better tools to assess credit risk
• Perceived opportunities for arbitrage
• Need to diversify and / or dissipate credit risk
• Liquidity issues / opportunities
• Disappearance of other trading opportunities

Understanding the Concept of Credit Risk and Credit Derivatives

• Risk splitting
• The roles of the protection buyer and protection seller
• Constraints of transactions
• The role of the intermediaries

Analysis of Credit Spreads

• Calculation of credit spreads
• Construction of credit spread curves
• The three main variables: credit spread, default probability and recovery value
• Rating agencies
• History of default rates

The Basic Instruments

• The Antecedents to Credit Derivatives
• Credit default swaps
• Total return swaps

Other Products

• Contingent Default Swaps
• Dynamic Default Swaps
• Sale & TRS packages
• Equity TRS Leveraged notes
• First Loss Credit Swap
• Credit-linked notes
• Cross Guarantees
• Spread Options
• Credit Put Option
• Substitution Option

The Credit-Linked Note Market-Place

• Structures
• Understanding the buyer
• Elements in the production process
• Vehicles for issuance

Risks in Credit Derivatives

• Practical Issues
• Moral Risk
• Hidden exposures
• Other risks

Delivering this course in-house for you to a number of participants could be very cost effective. Please call us on 020 7387 4484 to discuss this further.

If you have any questions about this seminar please write to us at post@redcliffetraining.co.uk.