Credit Default Swaps: From Vanilla to Exotic
Explore the valuation approaches for vanilla and exotic credit derivative products while describing the mechanics of each product.
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Module 1: Introduction
- Review of Valuation of Risky Bonds
- Credit Derivatives Market Overview
Module 2: Single Name CDS I - Reduced Approach
- Review of Probability
- Mechanics of Single Name Credit Default Swaps
- Deriving Simple CDS Pricing Model
- Sensitivity Analysis
- Model Assumptions
Module 1: Single Name CDS II - Structural Approach
- Review of Equity Option Pricing
- Firm's Value Models
- Merton (1974)
- KMV
- Black-Cox
- Duffie-Lando
- Lardy-Finkelstein (Credit Grades)
- Summary of Model Assumptions
- Reduced vs. Structural Approach
Module 1: Single Name CDS III - More Tools
- Risk Attribution
- Unwinding Single Name CDS
- Deriving Par CDS Spread from Cash Price
- Mechanics of Asset Swap
- Deriving Asset Swap Spreads from Bond Prices
- Deriving Forward CDS Spreads
Module 1: Correlation Products - Overview
- Standard CDS Index Portfolio
- Mechanics of Standard CDS Indices
- Families of Standard CDS Indices
- Correlation and Correlation Risk
Module 2: Correlation Products I - Nth-to-Default Basket Swaps
- Overview of Nth-to-Default Basket Swaps
- Mechanics of Nth-to-Default Basket Swaps
- Valuation Framework
- Pair-wise Correlation
- Pricing
- Sensitivity Analysis
- Correlation and Nth-to-Default Basket Swap
Module 1: Correlation Products II- Synthetic CDO
- Mechanics of Synthetic CDO and (Synthetic CDO)^n
- Correlation Modeling
- Compounded Correlation
- Base Correlation
- Volatility and Correlation Skew
- Sensitivity Analysis
Module 1: More Credit Derivatives Innovations
- Recovery Products
- Zero-Recovery CDS
- Recovery Locks
- Digital Default Swap
- Credit Options Products
- Pricing Credit Default Swap option
- Sensitivity Analysis
- Synthetic Products
- CDS on Preferred Securities
- CDS on Municipal Securities
- CDS on Asset-backed Securities
- CDS on Commercial Mortgage-backed Securities