Modern Credit Derivatives - Capital Markets courses by LFS
London Financial Studies
Duration: 3 Days
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Detailed information
| Duration: | 3 Days |
|---|---|
| Price: | Contact us |
| Type: | Courses |
| Method: | In a classroom |
| Accreditation: | This program is eligible for 24 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. |
| Prepares for: | This three-day course provides a comprehensive view of how modern credit derivatives are used for risk management, to create profitable opportunities through trading and arbitrage, and to create liquidity. A thorough analysis of the credit crisis, what went wrong and the future of credit derivatives will be considered. The course will provide an in-depth description of all credit products including Default Swaps, Total Return Swaps, Credit Linked Notes, CDOs and CLOs as well as addressing the various motivations and historical development of this market. Up to half of the course is devoted to small group sessions with practical exercises, case studies and simulations. Participants take away worked examples for use after the course. |
| Geared towards: | Traders Loan officers Risk managers Credit officers Fixed Income professionals Corporate bankers Regulators Investors Legal Back and middle office Product control |
| Requirements: | Participants only need a general knowledge of the capital markets for days 1 and 2. For day 3, some basic quantitative knowledge for covering the pricing aspects will be required. |
| Students per class: | 20 |
Do you need further information?
Contact the person in charge , free and at no obligation, for information on how to enroll, enrollment limit/availability and more.
Course program
The credit derivative market has changed substantially in the last two years and an understanding of these instruments is integral to making sense of today's financial markets. This three-day course provides a comprehensive view of how modern credit derivatives are used for risk management, to create profitable opportunities through trading and arbitrage, and to create liquidity. A thorough analysis of the credit crisis, what went wrong and the future of credit derivatives will be considered. The course will provide an in-depth description of all credit products including Default Swaps, Total Return Swaps, Credit Linked Notes, CDOs and CLOs as well as addressing the various motivations and historical development of this market. Up to half of the course is devoted to small group sessions with practical exercises, case studies and simulations. Participants take away worked examples for use after the course.
New Case Study: the evolving credit crisis and its implications for the future
Understand why the "crunch" occurred and the role that credit derivatives played in the development of the situation and the various roles that credit derivatives will play in solving the crisis.
How credit derivatives can help financial market participants mitigate the effects and recover from the aftermath of recent volatility
How firms and investors are using credit derivatives to profit from turmoil in the credit markets and to mitigate their ongoing risks
Lessons learned for both the sell and buy sides in the credit markets
How the credit derivative markets and regulation are changing as a result
Exploration of how a similar crisis might occur again and how to be prepared
Day One
Credit Default Swaps
Introduction
History of credit derivatives
Applications of credit derivatives
Classification of credit derivatives
Credit events
Why did the credit crisis happen and what can we learn?
CDS concerns
The Credit default swap (CDS)
CDS mechanics
CDS uses
Trading CDSs
The restructuring credit event
The Big and Small Bang protocols and ISDA 2009
Current European vs American CDS conventions
Workshop: simple spread based pricing of a CDS
CDS Risks
Cheapest to deliver optionality and delivery squeezes
Event risk
Unwind risk
Liquidity risk
Counterparty risk
Central counterparties
Workshop: simple example of unwinding a CDS and annuity risk
The CDS - Bond Relationship
The CDS basis
Credit linked notes (CLN)
Asset swaps and bonds
What drives the bond-CDS basis?
Workshop: Understanding the relationship between CDS, CLNs, assets swaps and fixed rate bonds
Day Two
Portfolio Credit Derivatives
Index Products
What is a CDS index?
Application of indices
Global and sectorial indices
Roll mechanics
Trading a CDS index
Workshop: The basis between a CDS index and a portfolio of CDS
Options
Single name CDS options
Cancellable CDS
Loan CDS (LCDS)
Other CDS products· Index options
Workshop: Calculating the forward CDS premium and pricing a CDS option, cancellable CDS and CMDS
Baskets
First to default (FTD) structures
Nth to default (NTD) structures
Pricing boundaries
The importance of correlation
Intuitive pricing and hedging
Workshop: simple pricing of a FTD and NTD
Collateralisation Debt Obligations (CDOs)
Index tranches
Rationale for synthetic (arbitrage) CDOs
Synthetic CDOs
Cash CDOs· CDO of ABS
The future of CDOs
Day Three
Practical Pricing and Trading of Credit Derivatives
Introduction to pricing
Why do models fail?
Default probability
Recovery rates
Estimating default probability
Historical data
Merton models
CDS spreads
Pricing CDS
Survival probabilities and hazard rates
Pricing a risky bond
Pricing a CDS
Calibrating a credit curve
Workshop: Calculating implied default probability and pricing CDS with up-front payments, converting from up-front to running spreads
Pricing CDOs - Part I
Credit portfolio models
Pricing formula for a CDO
The Gaussian copula approach
Monte Carlo simulation
Approximate implementations
Workshop: Pricing a CDO with Monte Carlo simulation and comparing to an approximate method
Pricing CDOs - Part II
Why did CDO models fail so badly?
Base correlation
Interpolation methods
Pricing bespoke CDOs
Why and how base correlation fails
Workshop: Using base correlation to price a CDO and avoiding the pitfalls
Dr Jon Gregory has over ten years experience as a practitioner in quantitative finance and is a partner at the capital markets consultancy Solum Financial Partners. From 1995 to 1997 he worked in the Fixed Income division of Salomon Brothers. From 1997 to 2005 he was with BNP Paribas and worked on many projects across the interest rate, equity, credit, insurance and risk management divisions. From 2005 until 2008 he was global head of credit analytics at Barclays Capital and responsible for a team of around 30 researchers globally. Jon has published a number of papers and articles on risk management, modelling and credit derivatives subjects and is a regular speaker at international conferences. He was a co-author of the book "Credit: A Complete Guide to Pricing, Hedging and Risk Management", nominated in 2001 for the Kulp-Wright award for the most significant text in risk management and insurance. He holds a PhD from Cambridge University.
New Case Study: the evolving credit crisis and its implications for the future
Understand why the "crunch" occurred and the role that credit derivatives played in the development of the situation and the various roles that credit derivatives will play in solving the crisis.
How credit derivatives can help financial market participants mitigate the effects and recover from the aftermath of recent volatility
How firms and investors are using credit derivatives to profit from turmoil in the credit markets and to mitigate their ongoing risks
Lessons learned for both the sell and buy sides in the credit markets
How the credit derivative markets and regulation are changing as a result
Exploration of how a similar crisis might occur again and how to be prepared
Day One
Credit Default Swaps
Introduction
History of credit derivatives
Applications of credit derivatives
Classification of credit derivatives
Credit events
Why did the credit crisis happen and what can we learn?
CDS concerns
The Credit default swap (CDS)
CDS mechanics
CDS uses
Trading CDSs
The restructuring credit event
The Big and Small Bang protocols and ISDA 2009
Current European vs American CDS conventions
Workshop: simple spread based pricing of a CDS
CDS Risks
Cheapest to deliver optionality and delivery squeezes
Event risk
Unwind risk
Liquidity risk
Counterparty risk
Central counterparties
Workshop: simple example of unwinding a CDS and annuity risk
The CDS - Bond Relationship
The CDS basis
Credit linked notes (CLN)
Asset swaps and bonds
What drives the bond-CDS basis?
Workshop: Understanding the relationship between CDS, CLNs, assets swaps and fixed rate bonds
Day Two
Portfolio Credit Derivatives
Index Products
What is a CDS index?
Application of indices
Global and sectorial indices
Roll mechanics
Trading a CDS index
Workshop: The basis between a CDS index and a portfolio of CDS
Options
Single name CDS options
Cancellable CDS
Loan CDS (LCDS)
Other CDS products· Index options
Workshop: Calculating the forward CDS premium and pricing a CDS option, cancellable CDS and CMDS
Baskets
First to default (FTD) structures
Nth to default (NTD) structures
Pricing boundaries
The importance of correlation
Intuitive pricing and hedging
Workshop: simple pricing of a FTD and NTD
Collateralisation Debt Obligations (CDOs)
Index tranches
Rationale for synthetic (arbitrage) CDOs
Synthetic CDOs
Cash CDOs· CDO of ABS
The future of CDOs
Day Three
Practical Pricing and Trading of Credit Derivatives
Introduction to pricing
Why do models fail?
Default probability
Recovery rates
Estimating default probability
Historical data
Merton models
CDS spreads
Pricing CDS
Survival probabilities and hazard rates
Pricing a risky bond
Pricing a CDS
Calibrating a credit curve
Workshop: Calculating implied default probability and pricing CDS with up-front payments, converting from up-front to running spreads
Pricing CDOs - Part I
Credit portfolio models
Pricing formula for a CDO
The Gaussian copula approach
Monte Carlo simulation
Approximate implementations
Workshop: Pricing a CDO with Monte Carlo simulation and comparing to an approximate method
Pricing CDOs - Part II
Why did CDO models fail so badly?
Base correlation
Interpolation methods
Pricing bespoke CDOs
Why and how base correlation fails
Workshop: Using base correlation to price a CDO and avoiding the pitfalls
Dr Jon Gregory has over ten years experience as a practitioner in quantitative finance and is a partner at the capital markets consultancy Solum Financial Partners. From 1995 to 1997 he worked in the Fixed Income division of Salomon Brothers. From 1997 to 2005 he was with BNP Paribas and worked on many projects across the interest rate, equity, credit, insurance and risk management divisions. From 2005 until 2008 he was global head of credit analytics at Barclays Capital and responsible for a team of around 30 researchers globally. Jon has published a number of papers and articles on risk management, modelling and credit derivatives subjects and is a regular speaker at international conferences. He was a co-author of the book "Credit: A Complete Guide to Pricing, Hedging and Risk Management", nominated in 2001 for the Kulp-Wright award for the most significant text in risk management and insurance. He holds a PhD from Cambridge University.
Do you need clarification regarding the course program?
Contact the person in charge , free and at no obligation, for information on how to enroll, enrollment limit/availability and more.
Course location
London Financial Studies
At London Financial Studies we concentrate exclusively on capital markets. We offer individuals, teams and companies a unique and expert teaching resource that combines theoretical understanding with practical experience and equips them to operate at the highest levels of efficiency and profitability
In the past decade London Financial Studies has become widely acclaimed as one of the best teaching resources for capital markets practitioners. Over that time we have delivered a diverse range of programmes to individuals, major financial institutions and government bodies worldwide.
The London Financial Studies ethos of combining excellent and effective teaching grounded in sound theory as well as relevant and practical real-world experience is a direct result of the experience of the founder, David Cox.
During his career in banking, he became aware of the acute need for high quality teaching relating to capital markets.
After leaving the City he joined the London Business School and set out to develop techniques and materials to meet this need. The result was a series of short courses for practitioners: The Financial Markets Seminar Programme. London Financial Studies has refined the approach and uses the same methodology throughout its programme.
In the past decade London Financial Studies has become widely acclaimed as one of the best teaching resources for capital markets practitioners. Over that time we have delivered a diverse range of programmes to individuals, major financial institutions and government bodies worldwide.
The London Financial Studies ethos of combining excellent and effective teaching grounded in sound theory as well as relevant and practical real-world experience is a direct result of the experience of the founder, David Cox.
During his career in banking, he became aware of the acute need for high quality teaching relating to capital markets.
After leaving the City he joined the London Business School and set out to develop techniques and materials to meet this need. The result was a series of short courses for practitioners: The Financial Markets Seminar Programme. London Financial Studies has refined the approach and uses the same methodology throughout its programme.