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Credit Derivatives - Pricing, Hedging & Strategies

COURSE DESCRIPTION

This program will give the participant thorough understanding of the credit derivatives market. It provides deep insight on kind of derivative products and their applications in the market. Successful Participants will be able to price a CDS and CDO post completion of this course.

CERTIFICATION AWARDED

On successful completion of the program, you would be awarded the professional certification in “CREDIT DERIVATIVES - PRICING, HEDGING & STRATEGIES” by Moody’s Analytics and EduEdgePro.

COURSE COLLATERALS AND HIGHLIGHTS

  • Pricing Models for Credit Derivatives in Excel-VBA
  • Comprehensive coverage on various credit derivatives
  • Exhaustive reading material covering detailed sections outlined below
  • Pre-requisite material on mathematics for Finance

COURSE OBJECTIVES

  • Wide range of uses of credit derivatives
  • The various products included in the general label credit derivatives
  • Pricing and hedging of credit and credit derivatives products
  • Practical, hands-on examples of various credit math tools and techniques
  • Insights into the latest credit derivatives products and applications strategies in the markets

WHO SHOULD ATTEND

This course is aimed at those who wish to explore the more advanced aspects of Derivative Markets to build a career in the below areas:
  • Quant Analyst
  • Model Validation
  • Derivatives Analyst
  • Structurer
  • Derivatives Pricing Specialist
  • Quantitative Risk Manager
  • Derivatives Strategist

Fast Facts

  • Certified by : Moody’s Analytics and EduEdgePro
  • Broad Coverage:
  • Introduction to Credit Derivatives Market
  • Credit Risk Framework
  • Single-Name Credit Derivatives
  • Multi-Name Credit Derivatives
  • CDS Valuation
  • What Drives The Basis?
  • CDS Mark-to-Market Valuation
  • Correlation in the Credit Market
  • CDO Valuation

  • DETAILED CURRICULUM

    The objective of this section is to introduce credit derivatives market structure to the participant. It covers role of credit derivatives, growth of credit derivatives market, Types of credit derivatives. The participant will also learn about the credit risk framework. Concept of credit curves and credit spread is covered in this section.

    Introduction to Credit Derivatives Market
    • Evolution of the Credit Derivatives Market
    • Role of Credit Derivatives
    • Growth of Credit Derivatives Market
    • Market Participants
    • Types of credit derivatives
    Credit Risk framework
    • Probability of Default and Recovery
    • Credit Curves
    • Credit Spreads
    • Possible Credit Events

    This section is aimed at explaining credit derivative products & their applications in financial world. Single name products like asset swaps, floating rate notes, credit linked notes and many more are covered in this section. Multi Name credit derivatives like basket CDS, Collateralized Debt Obligations, Arbitrage CDOs, Cash Flow CLOs are explained.

    Single-Name Credit Derivatives
    • Floating Rate Notes
    • Asset Swaps
    • Default Swaps
    • Credit Linked Notes
    • Repackaging Vehicles
    • Principal Protected Structures
    • Credit Spread Options
    • Bond Options
    • Total Return Swaps
    Multi-Name Credit Derivatives
    • Index Swaps
    • Basket Default Swaps
    • Portfolio Default Swaps
    • Collateralized Debt Obligations
    • Arbitrage CDOs
    • Cash Flow CLOs
    • Synthetic CLOs

    This section extensively covers valuation of credit default swaps. The participant will understand what drives the basis spread in a credit derivative. Mechanism of unwinding CDS and mark to market valuation is also explained using excel models. This section also introduces concept of correlation in credit derivatives.

    CDS Valuation
    • Valuation Factors
    • The Asset Swap Approach to Pricing
    • Funding Cost Arbitrage
    • Funding Cost Arbitrage
    • Sensitivity of Survival Probability to Recovery Rates
    What Drives The Basis?
    • The Main Drivers
    • Market Flows That Drive The Basis
    • Structural Basis Drivers
    • Asset (Equity) Volatility and Default Basis
    CDS Mark-to-Market Valuation
    • Mechanisms for unwinding CDS
    • Calculating the mark-to-market value
    • CDS MTM sensitivities
    Correlation in the Credit Market
    • What is Correlation?
    • Correlation in Credit Derivatives
    • Avoiding ‘Correlation Breakdown’
    • Estimating Default Correlation
    CDO Valuation
    • Valuation Factors
    • Gaussian Copula Model
    • Factor Model
    • Monte Carlo Simulations
    • Concept of base correlation and importance in pricing
    • Valuing CDO Tranches
    CDS Basket Valuation
    • Valuation Factors
    • Monte Carlo Simulations
    • Correlated baskets
    • Valuing FTD Basket
    • Valuing Ntd Basket

    This section is focused on understanding investment applications of the credit derivatives. Building tailored credit derivatives structures, Credit overlays, introducing leverage in a credit derivatives are some of the applications covered.

    Investment Applications
    • Building tailored credit derivatives structures
    • Credit overlays
    • Introducing leverage in a credit derivatives structure
    • How to hedge credit positions
    • Importance of CS01
    • Hedging Bond portfolios using Structured Credit derivatives
    • Hedging Credit Derivatives
    • Strategies using Synthetics

    DETAILED CASE STUDY AND EXCEL IMPLEMENTATION

    Let us bring our classes to you! Our in-house training are ideal for groups of 10 or more people. We can provide Off-the-shelf training in the form of our classic courses, or we can provide bespoke training, tailored to your organizational goals and objectives. Please contact us for further details