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 This 2 Day Masterclass will introduce the students to Credit Derivatives and will be conducted from an academic point of view as well as a practitioner point of view. The Credit Derivatives Market is one of the most important market in Banking today, still growing exponentially, exceeding growth expectations. Credit Derivatives are financial instruments that transfer all (or portion) of the credit risk of an underlying obligation or entity (or group of obligations or entities) from one party to another party without necessarily transferring the underlying asset. Their value is derived from the credit quality of an obligation such as a loan or a bond of a reference entity. The credit derivatives market began in New York in 1992 and is now the fastest growing sector in Derivatives market with an estimated $62 Trillion notional amount today compared with an estimated $40 Billion in notional amount in 1996 (according to the ISDA, International Swap & Derivative Association).
These instruments have attracted continuous attention from all market participants including regulators for their success but also because of their complexity in pricing and the fact that they are traded on the over the counter market (which implies lack of regulation and transparency, in addition to counterparty risk). The complexity stems simply from the fact that the underlying is creditworthiness (not tangible), especially when we deal with multi-name credit derivatives where multiple reference names are involved and thus add to complexity due to correlation and lack of historical data (at least at the start). In addition the market in which they have evolved has been criticized for the abnormal high level of backlog, settlement and confirmation inefficiencies .The objective of this seminar is thus to provide a clear understanding of what they are, the strategies used with credit derivatives, the risk management, the (slim) regulation and oversight surrounding them (and about to change) as well as how they are priced and involved in the current credit crisis and how some are related to subprime loans.
I-INTRODUCTION TO CREDIT DERIVATIVES
I-1-What are Credit Derivatives
- Derivatives & Credit Derivatives
- Overview and growth of the Credit Derivatives Market
- The triptych Credit Risk/Securitization/Derivatives
- Motivations in using Credit Derivatives
- Current Financial Crisis, Credit Derivatives and Subprime
I-2-Market Players
- American, European, Asian and Emerging Markets
- Banks, Hedge Funds, Insurance Companies and other players.
- Rating Agencies
- ISDA,BIS, Group of 30, CRMPG and others
- The BCBS and Basel II
- Regulatory treatment
I-3-Overview of Credit Derivatives Instruments
Single Name Credit Derivatives
- Asset Swap
- Credit Default Swaps
- Credit Linked Notes
- Total Return Swap
- Credit Spread Options
Multi-Name Credit Derivatives
- Cash CDO
- Synthetic CDO
- Nth to Default
- Basket of Default Swap
- Single Tranche SCDO
- SCDO
Traded Indices
- DJ CDX and DJ iTraxx
- Sub-Indices by Industry/Products
- Other Indices such as ABX : Credit Derivatives on MBS backed by Subprime Mortgage Loans
How the Ratings are done?
RISK RELATED WITH CREDIT DERIVATIVES (chapter 1, my notes)
- Credit Risk
- Market Risk
- Interest Rate Risk
- Settlement Risk
- Operational Risk
- Counterparty Risk
- Legal Risk
- Basis Risk
- Liquidity Risk
V-SINGLE NAME CREDIT DERIVATIVES: PRICING AND TRADING STRATEGIES (chapter 6 + my notes)
- Basic approaches to CDS Valuation
- CDS Sensitivities
- Hedging with CDS
- Managing Credit Risk with CDS
- Transferring Credit Risk with CDS
- Managing Regulatory Capital
- CDS Investments Strategies
- Long/Short
- Flatteners/Steepeners
- Other strategies
VI-MULTINAME CREDIT DERIVATIVES: PRICING AND TRADING STRATEGIES (my notes)
- Correlation, Portfolio Loss and the use of Copulas
- Monte Carlo simulation, Fast Fourier Transform and Recursive Algorithm
- Approaches to pricing Single Tranche Synthetic CDO, SCDO and FTD
- Price Sensitivities
- Correlation
- Subordination
- Time to maturity
- Recovery
- Interest Rates
- Leverage and tranche returns
- Risk management in trading tranches
- Delta Hedging
- Compound, Base and Implied Correlation Smile
- Trading Strategies
- Long/Short
- Flatteners/Steepeners
- pread Convexity trade
- Parrallel /Non Parallel Spread shift
- Other strategies involving correlation
- Trading Strategies using Indices
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This Financial Management masterclass provides a unique opportunity for busy executives to gain a comprehensive understanding on important finance topics that affects the long term financial health of the business including financial statement analysis and business valuation. Managers will be able to acquire essential financial skills to survive in today’s competitive.
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 Foued has over 15 years of experience in the markets and in the academia. He has provided extensive financial training and consulting in several areas of finance (Derivatives, Credit Derivatives, Fixed Income, Investment Management and Risk Management) to top tier Investment Banks such as Deutsche Bank Asset Management, Merrill Lynch, State Street and UBS; in the US, Europe and Asia. In addition Foued has provided CFA and PRM Exam Prep courses.
Prior to that, he worked as an Analyst for the New York State Banking Department dealing with Credit Derivatives Pricing, Basel II, Economic Reports and other issues. In the past, he also worked for a Real Estate Investment Firm in Paris, France, specialized in Residential Properties.
In the academia, Foued has been teaching for about 7 years, at the undergraduate and graduate level, teaching traditional and executive MBA finance courses. He is an Assistant Professor of Finance at Wagner College and a faculty in the International Executive Programs of the Zicklin School of Business at Baruch College(taught several times in China, Taiwan and Singapore).
Areas of Expertise:
- Fixed Income
- Derivatives (Options, Futures, Forwards, Swaps)
- Credit Derivatives (Single Name and Multi-name CDX)
- Portfolio Management
- Financial Economics and Risk Management
Education:
- Ph.D Financial Economics City University of New York, Graduate School, NY
- MS Economics (International Trade and Finance)
- BS Economics, University Paris XIII, France
Publication(s):
- Besides several articles written in the past, Foued has an upcoming book “Understanding Credit Derivatives” to be released this year (August, 2008). The book will provide a practical understanding of credit derivatives, their applications, pricing and strategies.
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| Date |
13 & 14 May 2010 (Thursday & Friday) |
| Venue |
Hotel Concorde, Orchard Road |
| Time |
9.00am to 5.00pm |
| Fee |
$1598 |
| Enquiries |
6720 3333 or Email: training@aventisgroup.com.sg |
Register by calling: (65) 6720 3333 or Email: training@aventisgroup.com.sg
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