financial risk fitness gmbh

Landsberger Straße 98 - D-80339 Munich
Phone +49 89 46139112 - www.financial-risk-fitness.com

Credit Derivatives and Credit Structured Products

The objective of this two day workshop is to familiarize participants with the products, trading conventions, pricing models and applications of credit derivative products as well as structured debt products. Discussions on hedging and investments will be held across case studies and scrutinized in light of the global banking crisis.

Who should attend

  • Credit Securitization Professionals
  • Traders and Market Makers of credit derivatives and structured credit products
  • Hedge Fund managers trading credit products
  • Investors using credit derivatives and structured products
  • Risk Managers and capital allocation managers
  • Management accountants and controllers
  • Internal auditors
Day One

Credit Derivatives

  • Introduction of Credit Derivative Products
    • Credit Default Swaps
      • Mechanics and Structuring of single name and Index CDS
      • Issues: Reference Entities, Definition of Credit Event, Settlement
    • Pricing a single name CDS
      • Actuarial Methods
      • Spread induced Methods
      • Equity Pricing Methods / KMV
    • Basket and “nth to Default” CDS – Mechanics
      • Discussion on Default correlation Issues
    • Total Rate of Return Swaps
    • Credit Spread Forward Contracts
    • Credit Spread Options contracts
    • Counterparty Risk in CDS – correlation between Underlying Default and Counterparty Default
  • Standardized ISDA Contracts for Credit Derivatives
    • The ISDA Standard CDS Model
    • Variations on CDS contracts and other credit derivatives
  • Pricing and Hedging Credit Derivatives
    • Example of Hedging a sovereign CDS
Day Two

Structured Credit Products

  • Credit Linked Notes – Structuring and Applications
    • Asset Backed Securities vs CDO Tranches
  • CDOs – Mechanics, Structuring Issues, Risk Transfer Applications
    • Balance Sheet CDOs
    • Arbitrage CDOs
    • Synthetic CDOs
    • Static vs. Managed CDOs
    • Cash Flow vs Market Value CDOs
  • Exotics:
    • AB- CDOs
    • CDO2, CDO3
    • CPDOs (constant Proportional Debt Obligations)
  • Pricing CDOs
    • Rating Based Methods
    • Dealing with Default correlations via Copula Functions
    • The “Contigent Leg Pricing Method”
    • The “Fee Leg Pricing Method”
    • Numeric Examples
    • Dealing with Implied correlations
    • Portfolio effects and the Value of Diversification – Discussion in light of lessons learned from the crisis in 2008
  • Hedging CDO Exposure
  • Conclusions and Discussions