Sub-navigation:

elearning > Credit spreads

Sub-menu:

Credit Spreads

What credit spreads, recovery rates and default probabilities are
How these three things are closely related
How implied credit spreads can be calculated
How implied default rates can be calculated
What influences credit spreads and default rates
The practical application to your credit exposures

45 minutes

8 question multiple choice test

1. Credit spreads, recovery rates and default probabilities

What a credit spread is
The market for credit risk
Credit default swap prices
Recovery rates, defined, historic data, loss given default
Default probability, defined, historic data

2. The credit spread

Using default probabilities and recovery rates to imply credit spreads
Example using probability of survival and probability of default
How recovery rates affect credit spreads
How default probabilities affect credit spreads
Why the implied credit spread and the market price of credit can differ

3. The default probability

Using credit spreads and recovery rates to calculate default probability
Example the expected loss for a portfolio
How credit spreads affect the expected loss
How recovery rates affect the expected loss
What credit spreads imply about losses
What this means for financial institutions

4. Summary

5. Test

Related Documents

Short courses>Credit derivatives

Credit Default Swaps

Market Guides > How dealers make money

15th October 2009

If you don't work as a dealer you probably see transactions or their results after they have been completed. Your role may be in operations, finance, risk, audit or compliance. You expect dealers to be profitable, after all isn't this what they are paid for? You definitely know that they can lose money too! So how do dealers make profits and what are the implications for the business? There are three ways a dealer can make money:

Quick Guides > Credit Linked Notes

Market Guides > Swap spreads

21st September 2009

The swap spread is the difference in yield between the interest rate swap (IRS) market and the government bond market. Normally you would expect the swap rate to be higher than the yield on similarly dated government bonds but this relationship can and does change. When it does it not only affects dealers who speculate but it can affect those intending to hedge, so it may affect you. Let's see how.

elearning > Credit linked notes

Learn about the following: How credit linked notes work. Why issuers and investors use credit linked notes. The main risks related to credit linked notes