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elearning > Credit default swaps

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Learn about the following:

How credit default swaps work. The basic terminology of credit trading.
How credit default swaps can be used. The risks and problems with credit default swaps.

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Course Summary

Credit default swaps menuCredit default swaps pricesCredit default swaps premium

Credit default swaps floating paymentCredit default swaps deltaCredit default swaps risk

  • 45 minutes
  • 10 question multiple choice test
  • How credit default swaps work
  • The basic terminology of credit trading
  • How credit default swaps can be used
  • The risks & problems with credit default swaps

Credit Default Swaps - the details

1. How credit default swaps work

  • Market prices, what they tell you
  • Reference entity
  • Buying and selling protection
  • Fixed payment, how it is calculated and who pays
  • Floating payment, trigger
  • Credit events
  • Floating payment amounts, cash and physical settlement

2. Using credit default swaps

  • Unfunded risk, example
  • Income, credit delta, loss given default
  • How the CDS price affects the trade value
  • Basis trades, the difference between the CDS price and cash spreads
  • Positive and negative basis trades, example
  • Relative value trades, example

3. Risks using credit default swaps

  • Reference entity credit
  • Risks for protection buyer and seller
  • Control using limits
  • Counterparty credit exposures
  • Control using collateral
  • Operational risk (confirmations, valuation, documentation, trade errors)

4. Summary

5. Test

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