Structured Credit Modeling

This is a methodological course on the analysis of credit risk for single-name and multi-name credit products. The focus lies on quantitative models for assessing the value and risk of products like corporate bonds, credit default swaps and more complex portfolio products including various types of collateralized debt obligations CDO's. The course will develop the models and whenever possible discuss the empirical evidence and experience on the performance of these models. The course is delivered using lectures and computer labs based on examples in Excel.

02-May-2012 -- 04-May-2012New YorkUSD$3375
NY Institute of Finance - Midtown9:00am - 4:30pm Instructional Method:
Group-Live
Instructor(s): [ Wilfred Daye; ] Wed Thu Fri Level: Intermediate

07-Nov-2012 -- 09-Nov-2012New YorkUSD$3375
NY Institute of Finance - Midtown9:00am - 4:30pm Instructional Method:
Group-Live
Instructor(s): [ Wilfred Daye; ] Wed Thu Fri Level: Intermediate

CPE CREDITS
21.5
The course is intended for professionals whose work exposes them to issues related to firm specific and portfolio credit risk. Among those who will benefit from the course are practitioners working as quantitative analysts, derivatives researchers and traders, credit risk managers, and credit analysts and researchers.
No advance preparation required.
Students will be able to:
  • Value a credit default swap using an equity-based and reduced form model
  • Estimate term structures of risk-adjusted default probabilities
  • Measure risk sensitivities of single-name credit derivatives
  • Develop a solid understanding of portfolio credit analytics such as the Gaussian Copula model
Some knowledge of derivatives theory would be an advantage
  • Accounting for Derivatives & Hedging
  • Financial Modeling - Core Skills Analyst Program
    • Day One: Single-Name Credit Analystics
    Structural credit risk models
    • The Merton framework and recent extensions
    • Implementation methodologies
    • Empirical performance

    Reduced form models

    • Implementation methodologies
    • Empirical Performance

    Credit Default Swaps and Corporate Bonds

    • Funded vs. unfunded exposures
    • The role of asset swap
    • The basis

    Trading strategies

    • Long/short positions
    • Curve trades
    • Basis trades
    • Capital structure arbitrage

    Day Two: Basics of CDO's and Default Dependence
    CDA Structures and Tranches
    • Arbitrage vs. balance sheet transactions
    • Cash vs. synthetic structures
    • Funded vs. unfunded CDO's

    Basics of Default Dependence

      Simulating Correlated Defaults

        The Gaussian Copula

    Day Three: Collateralized Debt Obligations II
    CDA Valuation
    • The simplest case: the binomial model
    • A step by step implementation of the Gaussian Copula

    Implied Correlations

    • Computing implied correlations
    • Base correlations
    • Term structure effects

    CDO Risk Measures

      Pushing the Gaussian Copula

      • Computing implied correlations
      • Base correlations
      • Term structure effects

      Recent Product Innovations

      • Constant proportional portfolio insurance (CPPI)
      • Constant proportion debt obligations (CPDO)
      • Credit default swaptions
      • Recovery swaps and locks
      • Annuity swaps
      • Credit indices on ABS and CMBS

    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.