Advanced Credit Default Swaps (CDS)

In-person teaching Classroom
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This course provides a deeper examination of Credit Default Swaps (CDS) for participants who are already familiar with their benefits and features.

It starts by looking at the mathematics behind their pricing and the factors that will affect this. Participants will consider the default probability, the net present value of the cashflows, and the use of bootstrapping in calculating the value of these.

The course introduces the constant hazard rate model and survival probability and then goes on to explain the relative value of CDS and how this can be used to make trades.

Finally, the course discusses the correlation of different assets, the factors affecting this and how this can be used in practice.


This course is for individuals with a working knowledge of credit markets and CDS.

Learning Outcomes

At the end of this course delegates should understand

  • The complexities of calculating default probabilities and CDS pricing
  • The Constant Hazard Rate model
  • CDS relative value and correlation trading

Course Content

Default Probabilities

  • Simple pricing model
  • Expected present value
  • CDS pricing with default probabilities
  • CDS pricing with term structure
  • Bootstrapping default probabilities

Constant Hazard Rate Model

  • Survival probability
  • CDS spread with constant hazard rate

Relative Value

  • Curve shape and correlation
  • CDS curve trades
  • CDS index tranches
  • Spread sensitivity

Trading Correlation

  • An intuitive explanation
  • Tranche sensitivity to correlation
  • Modelling correlated defaults
  • Gaussian copula
  • Implied correlation


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