Intermediate Credit Derivatives

In addition to your class tuition and study materials, you will receive the following:


Case Study

• Course case study

Exercises

• Course exercises

Other Extras

• Certificate of attendance

Level: Intermediate


Synopsis:
This module looks at further topics within CDS and CDO markets, specifically trading strategies, risks and the Greeks. This is suitable for delegates who have attended the introductory Credit Derivatives course, or those who already have a strong understanding of the market.


At the end of the course participants will be able to: Understand intuitively the pricing of exotic credit derivatives . Have a knowledge of more exotic structures . Have fluency with the mechanics of CDOs (Greeks, correlation) .


Prerequisites:
Introductory Credit Derivatives course or some experience of Credit Derivatives


Suitable For:
Individuals seeking to broaden their understanding of credit risk and credit derivatives from a practical point of view


Review - The story so far

• CDS - mechanics, pricing and motivations
• CDO / synthetic CDO structure
• Recovery values and the waterfall
• Cashflow and market value

Further Look at CDS

• Exotic CDS structures (forward starting, basket, CDS, options)
• Pricing mechanics for exotic CDS (term structure of default risk, correlation, volatility)
• Exotic CDS trading strategies

Further look at CDOs

• Exotic structures (CPPI, CPDO, CRE)
• Expected loss across the portfolio
• Expected loss per tranche
• Rating CDOs: attachment points and expected losses
• Why does a BBB tranche yield more than a BBB bond?
• Is this ratings arbitrage, or have the agencies got it right and we've got it wrong?
• Correlation revisited: long and short correlation with tranches
• Disaggregating spread risk and default risk

The Greeks - examining CDO tranche spread behaviour against underlying spreads / risk profiles

• Delta
• Gamma for parallel spread shift
• Gamma for idiosyncratic spread shift - GM/FORD