Advanced Credit Markets

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This “Advanced Credit Markets course provides participants with an understanding of some of the credit market’s more complex elements.

Starting with an explanation of the relationship between a Credit Default Swap (CDS) and bonds, the course looks at how CDS can be used to hedge and the importance of understanding basis.

The course covers asset backed securities; how they are structured and the benefits this gives. Participants will examine the position of all interested parties in the event of a default.

Finally, the course explains the different types of securitisation including Collateralised Loan Obligations (CLOs). Throughout the course we look at the respective risks and the factors driving the value of different assets.


This course is for individuals with a working knowledge of credit and fixed income derivative markets.

Learning Outcomes

At the end of this course delegates should understand:

  • The relationship between bonds and CDS
  • The credit waterfall and rating tranches
  • True sale and synthetic securitisation

Course Content

  • The relationship between bonds and CDS
  • CDS vs. asset swap
  • Hedging a bond with CDS
  • Pictorial representation of a bond vs. synthetic
  • Positive vs. negative basis
  • Exercises: Calculating credit spreads, asset swap spreads and basis
  • Asset backed securities
  • A simple vs. complex bank
  • Special Purpose Vehicle (SPV)
  • Advantages of securitisation
  • The credit waterfall
  • Subordination
  • Rating tranches
  • True sale and synthetic securitisation
  • True sale structure and credit enhancement
  • Creating a fully funded synthetic CLO
  • What happens in the event of a default
  • Pros and cons of securitisation
  • Risk management through securitisation
  • Single tranche CDO
  • Valuation drivers
  • Weighted Average Spread (WAS) and Weighted Average Rating Factor (WARF)
  • Excess spread and correlation within CDO
  • Exercises: Examining the risk management of a CLO tranche


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