Investment Education PLC

Credit Derivatives Overview
Last Updated - 23 July 2008
Todays Date -
Return to CoursePrint course
Duration 1 day
Available as an in-house course



Credit Derivatives are the fastest-growing segment of the derivatives market and are transforming the credit markets.  They have become the benchmark instrument for credit risk pricing in the loan and bond markets and have significantly extended participation beyond the traditional players by attracting insurers.  The single-name Credit Default Swap has emerged as the standard instrument and focus of liquidity allowing multiple-name products and forwards and options based on it to evolve at a rapid pace.





Delegates should be familiar with the fundamentals of government and corporate bonds.

This course is eligible for CPE or CPD credits with the Law Society and other professional bodies.







-Credit portfolio management.

-The limitations of the traditional credit risk market.

-The impact of the Capital Adequacy Directives.


Credit Default Swaps (CDS)


-Terms, physical delivery vs cash-settled.

-Main applications

-Who uses them and why

-The Cheapest To Deliver option


Forward CDS





CDS Options





Total Return Swaps





Credit/Bond Options





Pricing CDS


-Replication: the asset swap and the default cash basis.

-Reduced form models.

-Structural models and the equity-credit connection.


CDS documentation


-ISDAs 2003 Definitions.

-Reference entity, Credit events and the dispute over Restructuring.

-Reference and deliverable obligations.


Multiple-name products


-The importance of correlation.

-Credit-Linked Notes (CLNs).

-Portfolio swaps.

-nth to default basket swaps.

-Index swaps.

-Tranched index swaps.

-Synthetic Securitisation