Credit Derivatives and Structured Finance Training Course

Participants can interpret CDS cash flows, contract terms and settlement conventions.

• Single-name CDS premium legs, protection legs and accrued premium calculations
• Quoted spread conventions, running coupons and upfront payment mechanics
• ISDA Credit Derivatives Definitions and standard credit-event determinations
• Restructuring clauses: Modified, Modified-Mod and No Restructuring conventions
• Settlement auctions, deliverable obligations and cheapest-to-deliver selection
• Trade confirmations, novations and lifecycle events under ISDA documentation

Participants can value a CDS position and explain its principal market sensitivities.

• Bootstrap hazard rates from CDS par spreads and recovery assumptions
• Price CDS contracts using survival probabilities and discounted cash flows
• Calculate clean price, dirty price and mark-to-market exposure
• Assess spread risk through CS01, DV01 and jump-to-default measures
• Recovery-rate sensitivity and its effect on protection valuation
• Validate market inputs, curves and model assumptions before valuation

Participants can assess index and tranche exposures, including correlation-driven risk.

• CDX and iTraxx index construction, series rolls and liquidity
• Index tranches, attachment points, detachment points and tranche losses
• Base correlation surfaces and implied correlation calibration limits
• Compare bespoke tranches with standardised index-tranche exposures
• First-to-default baskets, kth-to-default notes and default correlation effects
• Analyse tranche sensitivity to spread, correlation and recovery changes

Participants can explain the structure, cash-flow logic and legal features of securitisations.

• Asset-backed securities cash-flow waterfalls and priority-of-payments structure terms
• Residential mortgage-backed securities prepayment, delinquency and foreclosure assumptions
• Commercial mortgage-backed securities loan pools, servicers and extension risk
• Collateralised loan obligations, collateral tests and reinvestment-period constraints
• Special-purpose vehicles, true-sale opinions and bankruptcy-remoteness considerations
• Compare pass-through, pay-through and tranched securitisation structures

Participants can model tranche cash flows and test the effect of changing collateral assumptions.

• Build monthly collateral cash flows from defaults, prepayments and recoveries
• Apply sequential-pay, pro-rata and turbo amortisation waterfall rules
• Model overcollateralisation, excess spread and reserve-account credit enhancement
• Stress base-case assumptions using default, recovery and prepayment scenarios
• Calculate weighted-average life, average life and tranche cash-flow timing
• Reconcile model outputs to trustee reports and transaction documentation

Participants can assess asset-pool quality and determine how credit enhancement protects investors.

• Obligor analysis using financial ratios, covenant headroom and industry drivers
• Pool stratification by vintage, geography, FICO score and loan-to-value
• Rating-agency approaches to default, recovery and correlation assumptions
• Credit enhancement sizing through subordination, guarantees and excess spread
• Review servicer quality, workout practices and data-reporting reliability
• Identify adverse selection, moral hazard and agency conflicts

Participants can identify counterparty, capital and accounting consequences of credit-risk positions.

• Counterparty credit risk, potential future exposure and credit valuation adjustment
• Collateral agreements, thresholds, haircuts and margin-period-of-risk assumptions
• Basel capital treatment for securitisation exposures and credit derivatives
• IFRS 9 classification, impairment staging and expected credit-loss effects
• Fair-value hierarchy, model risk and valuation adjustment governance
• Wrong-way risk controls for protection sellers and correlated collateral

Participants can review key operational controls across the credit-derivative trade lifecycle.

• ISDA Master Agreement provisions governing close-out netting and collateral
• Credit Support Annex terms: eligible collateral, thresholds and independent amounts
• Confirm economic terms, legal entities and settlement instructions before execution
• Manage novations, compressions, assignments and consent requirements
• Establish valuation dispute processes, independent price verification and reserves
• Monitor payment failures, credit events and exception escalation procedures

Participants can select and document appropriate credit hedges for portfolio objectives.

• Map hedging objectives to CDS, indices, tranches and funded notes
• Compare basis risk between bonds, CDS and index hedges
• Construct hedge-ratio calculations using spread sensitivities and notional exposures
• Evaluate hedge effectiveness under default, restructuring and liquidity scenarios
• Prepare a trade rationale covering economics, risks, controls and approvals
• Create a 90-day application plan for desk or portfolio priorities