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.

Suitability

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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