Sub-navigation:


Join Mailing List

For regular updates via email enter your details below:

elearning > Credit spreads

Print Preview Send to a Friend Share

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

Free to ViewShort courses>Credit derivatives 100% relevant


Registration RequiredCredit Default Swaps 97% relevant


Payment RequiredMarket Guides > How dealers make money 95% relevant

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:


Registration RequiredQuick Guides > Credit Linked Notes 92% relevant


Payment RequiredMarket Guides > Swap spreads 91% relevant

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.


Payment Requiredelearning > Credit linked notes 90% relevant

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