ACF Academy
Derivatives Training Training
 Derivatives Training
Targeted Audience:
 Anyone working in credit, fixed income, or derivatives.
 An understanding of bonds and the bond markets.
CPE Credits:
 14 hours
Course Level:
Date  DurationCostVenueRegister
1-2 Mar 2018  2 days$2750.00New York
15-16 Mar 2018  2 days£1925.00London
2-3 Apr 2018  2 days£1925.00London
19-20 Apr 2018  2 days£1925.00London
15-16 May 2018  2 days£1925.00London
29-30 May 2018  2 days$2750.00New York
14-15 Jun 2018  2 days$2750.00New York

Credit Derivatives

The credit derivatives market is one of the largest derivatives markets in the world, and is used as the benchmark for measuring the credit risk of companies and governments throughout the world.

Over the past few years, credit derivatives have experienced many changes in their evolution, including the move to standardized premiums, the adoption of the ISDA Standard Model for CDS pricing, the latest 2014 Credit Derivatives Definitions, and the growth of CDS Swaptions.

This intensive two-day seminar brings you right up to date on the latest developments, and its objectives are to:

Explain the various credit derivatives structures and products
Examine in detail how Credit Default Swaps (CDS) work
Explore market practices including standardized premiums, determination committees, and auction settlement
Show how index products work in practice
Provide delegates with a clear understanding of how credit derivatives can be used in practice to manage and hedge credit risk
To provide an intuitive insight into the way in which these credit derivatives are priced
Show how credit derivatives add value for buyers and sellers
Discuss the regulatory implications of credit derivatives
Hot Topic  Credit derivatives and sovereign government debt


Course Outline
 Introduction to Credit Derivatives
Principles and functions of credit derivatives
The credit derivatives market
Participants and their roles
Motivations for using credit derivatives
Growth of the market and recent trends
Types of credit derivatives
 Credit Default Swaps and other Credit Derivatives
Introduction to CDS
Terms and definitions
Credit events
Settlement methods
Determination Committees
Market and trading conventions
Standardised premiums and recovery rates
Calculating up-front payments
Sovereign vs. other reference entities
Recovery locks and other recovery products
Central clearing, ICE Clear Credit and ICE Clear Europe
Swap Execution Facilities (SEFs)
Other recent changes and events
Auction settlement – how it works
ISDA and CSA agreements
Restructuring: XR/NR, MR, MM, and CR/FR
Reference and other obligations
Backstop dates
Successor events
Other single name products...
Asset swaps
Total return swaps
Credit spread products
Credit-linked notes (CLNs)
 Using Credit Default Swaps
Who uses CDS’s?
CDS applications…
Managing credit risk exposure
Hedging default risk
Enhancing yield and generating income
Providing market access
Accessing diversified portfolios
Implementing directional credit views
Monetising relative credit views
Using credit default swaps
Curve trades
CDS application ideas
 Trading Simulation
 Trading CDS's
In this session, delegates will use the Global Trader simulator to trade and manage a book of credit default swaps. The session will explore some of the dynamics of CDS prices, as well as the practical illustration of curve risk and the SDV01.
 Index Products
The CDX and iTraxx indices
Geographic and sector coverage
Index construction
Who uses indices?
Index trading applications
Index trading example
Other indices e.g. SovX, LCDX, and CMBX
 Pricing Credit Default Swaps
An “intuitive” approach to CD pricing
Credit risk and credit spreads
Term structure of credit spreads
Calculating CDS premiums
The ISDA CDS Standard Model
Bootstrapping default probabilities
Implied default and survival probabilities
Cumulative default rates
Recovery rates
Calculating up-front payments with standardised premiums
The SDV01 and PV01
Obtaining CDS premiums from default probabilities
Bootstrapping default probabilities from CDS premiums
The Bloomberg CDSW screen
 Portfolio Credit Derivatives
The importance of correlation
Portfolio / basket credit derivatives
First-to-default swaps
2nd-to-default and other variations
Collateralised Debt Obligations (CDOs)
CDO structures and the role of the SPE
Senior, mezzanine, and equity pieces
The “waterfall” of cash flows
Designing a CLO structure
 Tranched CDX and iTraxx Trading
CDX and iTraxx tranches
Risk / return characteristics of each tranche
Characteristics of the equity piece
Characteristics of the mezzanine pieces
The impact of correlation
Tranche pricing methodology
The concept of delta
Creating tranched CDO structures
Using a tranched CDO structure
 Credit Default Swaptions
Definitions and terminology
Size of market
Payers vs. receivers swaptions
Options on indexes vs. options on single names
What happens if a credit event occurs...
Knockout vs. non-knockout variations
Comparison with other options
Using Credit Default Swaptions
Cancellable and extendable CDS contracts


NB All practical sessions are highlighted like this:
means a Workshop or Simulation
means a Case study




"The overview was excellent – right balance for his audience – to address everyone's need."

– Dorothy M.