CREDIT DERIVATIVES
PROGRAM OUTLINE
The class introduces students to credit markets and instruments. We will review LIBOR markets and examine the drivers of credit spreads and see how these are traded in he 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 and asset backed (CLOs, CBOs, etc.) securities. We will look at his carious tranches are created and rated.
PRE-REQUISTES
Students should already have an understanding of interest rate mathematics and relationships between interest rates and bonds prices. This can be gained from the Interest Rate Calculations and Bond Calculations classes in this series.
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 world 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
OPTION PRICING 2
Students will understand how to use a binomial risk-neutral option valuation model This will lead directly to the Cox-Ross-Rubenstein version. Students will then be able to use this model to initially call European options, but will quickly be able to move on to using this model to call American options and many exotic options. Students will understand the principles and assumptions underlying Black-Scholes, and will master the pricing formula.
LEARN MOREEXOTIC DERIVATIVES
To understand the reasons for using exotic over standard options and gain insight into why exotics are sometimes more expensive or cheaper.
GET STARTEDSTRUCTURED PRODUCTS ADVANCED
Understand why investors may choose to buy various types of structured products. Understand how a bank provides products with structured payoffs.
LEARN MOREINTEREST RATES SWAPS AND SWAPTIONS
Understand items on swap term sheets. Learn what drives value of a swap as the rates market moves. How to use swaps to hedge cashflow, risk or mark-to-market risk. Then look at the swaptions markets as a direct extension of what has already has been done.
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