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  • Credit Derivatives Workshop - PC Based

Credit Derivatives Workshop - PC Based

  • Derivatives
  • Duration: Two days
  • 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:

    • Course Introduction and Objectives

    Session 2:

    Market Background

    • What is credit risk

    • How & why banks manage credit exposures

    • 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:

    • Asset swap structures

    • Pricing credit spreads/why credit spreads change

    • What can go wrong

    • Par/par structures

    • Credit risk and returns

    • Structuring an asset swap

    • 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:

    • Market Statistic Total Return Swaps, (TRS)

    • Credit Default Swap

    Session 4:

    How and why Banks use Credit Derivatives

    This section explains some of the main uses for CDs:

    • Synthetic credit portfolios- selling protection

    • Hedging credit exposure from existing trades-buying protection

    • Investment opportunities- arbitraging repo rates

    • Funding- embedding credit risk in MTNs

    • Tax arbitrage transactions

    • Reducing capital use/repackaging capital intensive assets

    • 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.

    • ISDA Master Agreement and credit definitions

    • Recognition that every ISDA is unique

    • Jurisdiction of the parties involved

    • Credit Events/Credit Event Definitions

    • General definitions (entity, reference obligations etc.)

    Session 2:

    Confirmations:

    • Purpose of standard confirmation

    • 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:

    • Embedded credit derivatives

    • Defining default

    • reference entity difference

    • 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:

    • Business case

    • Board and ALCO approval

    • Risk Management approval and sign off

    • Internal Audit approval

    • Accounting treatment

    • Lead regulatory approval and sign off

    • Appropriate limit structures

    • Agreed legal documentation

    • Counterparty credit risk approval

    • 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.

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