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A Trader’s guide to Credit Derivatives


Objective: a 3-day comprehensive programme to illustrate when and how to consider/structure credit derivatives in the real world to optimally manage P&L, position keeping, and risk management issues, and:

·    To understand how many traditional products have implicit embedded credit derivatives

·    To understand the issuer and buyer perspectives and economic drivers of credit derivatives

·    Pricing and hedging credit derivatives such as Total return swaps, Default options, Default options on baskets of assets, Downgrade options, Synthetic assets

Will learn to answer questions like:

·    What are the special features of credit as an underlying asset for a derivative contract

·    How to structure credit derivatives to optimise risk/ return profiles for both issuer and purchaser including tax and regulatory optimisation

·    How price and hedge credit derivatives

·    How to structure credit derivatives including creating credit linked securities

Audience: market professionals (some understanding of markets/ products helpful)

·    Traders, Sales, Middle Office, Support Staff, Senior Management, Treasurers, Risk Management and Internal Audit from the “Sell-Side” and Fund Mangers, Treasurers and Senior Management from the “Buy-Side”


Table of Contents

1)     Introduction to Credit Derivatives: covers economic need, uses, and markets for credit derivatives

2)     Review of Traditional Credit Products: credit risk as a component in traditional products such as bonds, loans and derivative contracts. How to separate risk factors to factor the pricing and risk of these products and to identify the embedded credit derivatives.

3)     Valuation of Credit Derivatives Part 1: pricing each of traditional IR products including a review of present value theory, as well as the pricing of traditional securities and derivatives, including curve building and related credit spread issues.

4)     Valuation of Credit Derivatives Part 2: review of the methods of obtaining and estimating the market parameters necessary to price credit derivatives

5)     Valuation of Credit Derivatives Part 3: review of tools required for the valuation of contingent claims and options including valuation under uncertainty, risk neutrality concepts (and their usefulness), valuation of IR options and the special factors affecting IR term options, as well as review of special valuation consideration for credit options.

6)     Pricing and Application of Credit Derivatives: description, consideration and valuation of common and not so common credit derivatives including default swaps, total return swaps, credit options, and synthetic/structured credit derivatives.

7)     Internal and Operational Issues for Credit Derivatives: review of regulatory and operational matters as applied to credit derivatives such as regulatory requirements, reporting and capital requirements, control issues, and documentation.

8)     Risk Management of Credit Derivatives:  review of traditional and modern risk concepts and methods (sensitivity, VaR and holding period) for assessing and controlling exposure, with comprehensive consideration of specific methods of credit risk assessment and their pros/cons such as CreditMetrics, KMV, and the reality impact of liquidity and correlation issues to sensible risk management.  


830 Pages of comprehensive and extensively illustrated Handout Notes (see samples here)

Plus copies of relevant TG2 Books/e-Books

Note: Seminars can be tailored to your trading, risk, client, and systems needs.  Submit your needs, and/or "cut/paste" from other Seminars (see entire "standard" list HERE)

    Get a Syllabus in more detail

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Last modified: July 25, 2011