Course Overview

This training course aims to introduce key concepts and fundamental mechanisms of the credit markets (corporate and sovereign bonds, credit derivatives) and an overview of the most recent developments concerning these markets.

Course Objectives

Credit market operators and other finance personnel shall be equipped with up to date skill to enable them function successfully in this department

Course Outline

– Credit events typology (overdraft, default), legal characteristics
– Agency ratings (S&P, Moody’s), notions of bid/offer spread for bonds
– Payment default correlations within a credit portfolio
– Using transition matrices
– Prudential and accounting processing of credit instruments

Corporate credit bond market

– Financial analysis and corporate risk assessment
– Introduction to corporate benchmarks : Merrill Lynch Investment Grade and high yield
– Bonds bid/offer spread determiners : theoretical models, empirical validations

Sovereign bond market

– Macroeconomic analysis and determination of sovereign risk
– Introduction to the sovereign benchmarks : JP Morgan’s EMBIG and GBI indices
– Determination of sovereign spreads : theoretical models and empirical validations
– Stress events management : contagion risk aversion

 Introduction to credit derivatives and structured products

– Credit Default Swaps (CDS) : characteristics and valuation
– Credit linked notes, Total return swaps, and spread-based options
– Collateralized Debt Obligations (CDO) : cash and synthetic
Application : use of CDS in hedging and use of CDS in speculation