Credit risk has existed since the first loan. This may account for the incredible growth of the credit default swap or CDS market – estimated at $14.5 trillion in notional value (Office of the Comptroller of the Currency’s quarterly report on bank trading and derivatives activities, 3Q 2010) – and allows you to trade the ‘pure’ credit risk embedded in so many different securities as a separate instrument.
While CDS is the bedrock product of the credit derivatives market, the interrelated nature and lack of transparency of the CDS market also has been blamed for the global credit crisis. Recent events, as well as initiatives by clearing platforms, have focused on creating greater transparency and on lowering systemic risk by migrating CDS from an OTC to a Central Counterparty model – where many transactions would be cleared through clearinghouses. This one-day course will provide an overview of the CDS markets and how market participants use this product to express a view on a credit, or to hedge an undesirable credit risk.
After the course you will be able to:
· Understand that the perfect corporate bond can be divided into a risk free component, a receiver interest rate swap, and a credit default swap on the same name
· Comprehend where investors are paid the most for accepting the same credit risk
· Evaluate which is more lucrative: Long the company’s bonds, or short their CDS
· Interpret the relationship between the CDS spread and Asset Swap spread; meaning, is the basis positive or negative?
Cost: $495 Early-bird | $550 Standard registration. Complimentary refreshments are provided.
