Credit Default Swaps: From Vanilla to Exotic - Evening

Credit derivatives is one of the most successful innovations of financial engineering over the last ten years. The current active credit derivatives market has produced an array of new products. This course explores the valuation approaches for vanilla and exotic credit derivative products while describing the mechanics of each product. Hands-on Excel™/VBA exercises are used to facilitate theoretical understanding. The class also discusses real-life position examples as case studies to illustrate applications of credit derivatives.

06-Mar-2012 -- 10-Apr-2012New YorkUSD$1875
NY Institute of Finance - Midtown5:45pm - 8:15pm Instructional Method:
Group-Live
Instructor(s): [ Wilfred Daye; ] Tue Level: Intermediate

23-May-2012 -- 27-Jun-2012New YorkUSD$1875
NY Institute of Finance - Midtown5:45pm - 8:15pm Instructional Method:
Group-Live
Instructor(s): [ Wilfred Daye; ] Wed Level: Intermediate

02-Oct-2012 -- 06-Nov-2012New YorkUSD$1875
NY Institute of Finance - Midtown5:45pm - 8:15pm Instructional Method:
Group-Live
Instructor(s): [ Wilfred Daye; ] Tue Level: Intermediate

CPE CREDITS
15.0
Anyone who has an interest in credit derivatives.
No advance preparation required.
Students will be able to:
  • Understand intuitions behind various valuation approaches
  • Develop hands-on, spreadsheet modeling skills
  • Build basic pricing models for credit derivative products
  • Demonstrate application of these skills to solve a variety of investment related problems
Attendees must have a solid knowledge of Excel
"This course has too many strengths to name; I highly recommend it!"
"The instructor was knowledgeable and very experienced in this sector."
SESSION ONE
Introduction
  • Review of Valuation of Risky Bonds
  • Credit Derivatives Market Overview

Single Name CDS I – Reduced Approach

  • Review of Probability
  • Mechanics of Single Name Credit Default Swaps
  • Deriving Simple CDS Pricing Model
  • Sensitivity Analysis
  • Model Assumptions

SESSION TWO
Single Name CDS II – Structural Approach
  • Review of Equity Option Pricing
  • Firm’s Value Models
  • * Merton (1974)
  • *KMV
  • *Black-Cox
  • *Duffie-Lando
  • *Lardy-Finkelstein (CreditGrades)
  • Summary of Model Assumptions
  • Reduced vs. Structural Approach

SESSION THREE
Single Name CDS III – More Tools
  • Risk Attribution
  • Unwinding Single Name CDS
  • Deriving Par CDS Spread from Cash Price
  • Mechanics of Asset Swap
  • Deriving Asset Swap Spreads from Bond Prices
  • Deriving Forward CDS Spreads

SESSION FOUR
Correlation Products – Overview

    Standard CDS Index Portfolios

    • Mechanics of Standard CDS Indices
    • Families of Standard CDS Indices
    • Correlation and Correlation Risk

    Correlation Products I – Nth-to-Default Basket Swaps

    • Overview of Nth-to-Default Basket Swaps
    • Mechanics of Nth-to-Default Basket Swaps
    • Valuation Framework
    • *Pair-wise Correlation
    • * Pricing
    • Sensitivity Analysis
    • Correlation and Nth-to-Default Basket Swap

SESSION FIVE
Correlation Products II– Synthetic CDO
  • Mechanics of Synthetic CDO and (Synthetic CDO)^n
  • Correlation Modeling
  • Compounded Correlation
  • Base Correlation
  • Volatility and Correlation Skew
  • Sensitivity Analysis

SESSION SIX
More Credit Derivatives Innovations
  • Recovery Products
  • - Zero-Recovery CDS
  • - Recovery Locks
  • - Digital Default Swap
  • Credit Options Products
  • - Pricing Credit Default Swaptions
  • - Sensitivity Analysis
  • Synthetic Products
  • - CDS on Preferred Securities
  • - CDS on Municipal Securities
  • - CDS on Asset-backed Securities
  • - CDS on Commercial Mortgage-backed Securities

Clients who register for this course will receive a complimentary 4-month subscription to FT.com. The Financial Times is the world's most respected financial newspaper, providing a broad assessment on finance, business and the industrial sector. The move to the electronic version follows an ongoing review of our environmental responsibilities as a global business and as part of the Pearson group. FT.com also has features that are not available in hard copy, such as: Special Reports, Alphaville, editor blogs, education sections and much more! Subscriptions will start within 6-8 weeks of the start of class and are limited to one subscription per client. (Please note: as of May 1, 2011, the electronic subscription replaces the hard-copy 3-month Financial Times subscription.)

Lunch is included for all students taking day classes.