With yields in the US and elsewhere apparently stuck at low levels, many investors are looking to credit as a source of yield. But credit markets offer a vast and sometimes bewildering array of cash and derivatives investments to investors, and assessing risk and opportunity in credit markets has been made more complex by market and regulatory responses to the credit crisis.
In this interactive course, we examine the trading opportunities offered by a range of credit derivatives, including single-name credit default swaps (CDS), CDS index swaps and structured credit instruments. Attending the course will help you understand how credit risk is priced in these instruments and will improve your ability to construct, analyze and control trades that express outright or relative value views in credit markets.
Course Objectives
By the end of the course, participants will be able to:
- Identify factors that drive credit spreads and why credit spreads vary across the capital structure for a given company
- Explain, interpret, and compare standard credit spread measures that are used in the market
- Identify and analyse risk factors in single-name CDS transactions
- Construct and analyze trading strategies for single-name CDS contracts
- Explain how CDS premiums are related to expected loss
- Describe how default correlation is traded in structured credit markets
- Calculate implied risk-neutral default probabilities from CDS premiums
- Describe the market for structured credit, including cash and synthetic collateralized debt obligations (CDO), synthetic single-tranche CDOs, tranches based on CDS indexes, and default baskets
- Identify risk factors in structured credit
Suggested Prerequisites:
- Credit Derivatives
- Credit Modeling or equivalent knowledge
Program Level: Advanced
Advance Preparation: None
Computers and Financial Calculators: N/A
Recommended CPE Credits: 7