Credit Derivatives Workshop - PC Based
Information
This is a Two-day PC- based workshop is an introduction to credit derivatives and assumes no prior detailed knowledge. An exposure to traditional cash and derivative products at an operational level would be helpful.
Training will include a mixture of presentation and case study material; participants will be required to use an Excel spreadsheet although detailed knowledge of Excel will not be required.
Schedule
Day One
Session 1:
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Course Introduction and Objectives
Session 2:
Market Background
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What is credit risk
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How & why banks manage credit exposures
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Why credit derivative markets have grown
Session 2:
Building Blocks of Credit Trading
This section introduces how banks traditionally trade credit spreads using swaps & bonds:
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Asset swap structures
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Pricing credit spreads/why credit spreads change
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What can go wrong
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Par/par structures
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Credit risk and returns
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Structuring an asset swap
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Funded nature of transaction
Session 3:
Credit Derivative Products
This section looks at the growth in credit derivatives and explains how the main CDs work:
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Market Statistic Total Return Swaps, (TRS)
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Credit Default Swap
Session 4:
How and why Banks use Credit Derivatives
This section explains some of the main uses for CDs:
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Synthetic credit portfolios- selling protection
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Hedging credit exposure from existing trades-buying protection
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Investment opportunities- arbitraging repo rates
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Funding- embedding credit risk in MTNs
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Tax arbitrage transactions
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Reducing capital use/repackaging capital intensive assets
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Managing credit risks on existing OTC products
Day Two
Session 1:
The Legal Framework
The section is intended as an introduction to the terms and documentation used for Credit Derivatives.
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ISDA Master Agreement and credit definitions
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Recognition that every ISDA is unique
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Jurisdiction of the parties involved
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Credit Events/Credit Event Definitions
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General definitions (entity, reference obligations etc.)
Session 2:
Confirmations:
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Purpose of standard confirmation
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Term sheet including, fixed and floating rate payer, reference entity & obligation, credit events, pricing sources, accrued interest, settlement method, deliverables
Session 3:
Problems with Credit Derivatives
This section is intended to explain why CDs need careful consideration before trading commences:
How and why CD transactions have gone wrong for financial institutions:
Session 4:
Selected case studies:
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Embedded credit derivatives
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Defining default
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reference entity difference
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Deliverable instruments
Session 5:
Checklist for starting credit derivatives
This section considers the appropriate questions that need to be considered before CD trades are entered into for the first time:
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Business case
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Board and ALCO approval
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Risk Management approval and sign off
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Internal Audit approval
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Accounting treatment
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Lead regulatory approval and sign off
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Appropriate limit structures
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Agreed legal documentation
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Counterparty credit risk approval
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Dealing Mandates
Course Close
Register interest
As every course we run is tailored to meet the specific needs of each client, we can only provide an estimate after fully understanding your specific requirements. Please complete the form below of call +44 (0) 208 894 4977 to discuss how Taylor Associates can help you.