CREDIT DERIVATIVES

PROGRAM OUTLINE

This class introduced students to credit markets and instruments. We will review LIBOR markets and examine the drivers of credit speeds and see how these are traded in the asset swap market.

Then we will look at credit default swaps (mechanics, uses, users) being the most commonly traded credit derivative. We will also cover credit-linked notes and asset-backed (CLOs, CBOs, etc) securities. We will look at hoe various risk ranches are created and rated.

PRE-REQUISTES

Students should already have an understanding of interest rate mathematics and relationships between interest rates and bond prices. This can be gained from the Interest Rate Calculation and Bond Calculations classes offered in this module.

CONTENT

– Interest rate risk on floaters vs. bonds
– Credit (spread) ‘delta’
– Asset swaps and asset swap margin
– Drivers of credit spreads
– Trading credit spreads
– Credit default swaps
– Asset-backed securities

COURSE DURATION

1 Day

WHO SHOULD TAKE THIS COURSE?

Cross-product audience as although its natural for the fixed income worlds to be interested, periodically the equities world rediscovers that credit can have a major impact on the value of equities

MODULES

These courses are included in this module

INTRODUCTION TO FINANCIAL MARKETS: FIXED INCOME

To untangle the language and purpose of the financial markets and to enable students decide the direction of their futures studies/career.

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BOND CALCULATIONS

To gain a basic understanding of bond pricing and risk. Also an essential before approaching topics in credit markets.

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BOND MARKET FUNDAMENTALS

To investigate issues practitioners experience in investing and trading fixed income instruments. To understand the risk implications of long and short-dated debt.

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CONVERTIBLE BONDS

Introduction to convertible bonds, advantages, disadvantages to traditional securities to investors and issuers.

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