Explore the Fundamentals of Credit Derivatives and the Different Types Available in the Market.

DUBLIN, Ireland -- Research and Markets (http://www.researchandmarkets.com/reports/c28972) has announced the addition of E-Learning Course: Credit Products to their offering.

This course takes you through the mechanics of the most basic form of credit derivative trade (the credit default swap) and builds on this to describe a number of other credit derivatives. The course outlines the typical applications of credit derivatives in the market and the associated risks, along with the pricing of these instruments and the legal/regulatory issues involved in their use. The course also covers the process of securitization and looks in detail at both mortgage-backed and asset-backed securities.

In this course, you will explore:

--The fundamentals of credit derivatives and the different types available in the market

--The legal and regulatory issues surrounding the use of credit derivatives

--The methods used to price credit derivatives

--The structure, application and valuation of credit default swaps and total rate of return swaps

--The fundamentals of securitization

--Asset-backed and mortgage-backed securities 

The following tutorials are included in this E-Learning course:

1. Credit Derivatives - An Introduction

Credit derivatives are instruments that allow one party to transfer an assets credit risk to another party without transferring ownership of the underlying assets. Credit derivatives have a wide range of structures and can be used for both credit risk management and for speculation. This tutorial explains what credit derivatives are and examines a basic credit derivative transaction. The evolution of the trillion-dollar credit derivatives market and the risks involved in dealing with credit derivatives are also presented.

2. Credit Derivatives - Types

The credit default swap is the most popular form of credit derivative and was the first structure to be used in the credit derivatives market. As the market has developed and increased in sophistication, other credit derivative structures have been created. This tutorial introduces these structures and gives a brief description of their specific applications.

3. Credit Derivatives - Uses & Applications

The market for credit derivatives continues to develop, servicing an ever-widening range of applications, ranging from credit risk to regulatory capital management to management. This tutorial outlines the most important uses and applications of the instruments by both protection buyers and protection sellers.

4. Credit Derivatives - Regulation & Documentation

This tutorial examines the effect of Basel I and Basel II capital adequacy requirements for the credit derivative positions held by banks. It also looks at credit derivative definitions published by the International Swaps and Derivatives Association (ISDA).

5. Credit Derivatives - Pricing Methods

The growth in the credit derivatives market has fuelled the need for accurate ways of valuing these instruments. This tutorial looks at the relevant factors and approaches used to price credit derivatives.

6. Credit Derivatives - Credit Default Swaps

Credit default swaps are the most commonly-used credit derivative instrument, representing roughly 70% of total credit derivative outstandings. They facilitate the transfer of credit risk - but not market risk - whereby the protection seller (investor) makes a payment to the protection buyer in the event of default. In return, the seller receives a periodic protection premium. In this tutorial, we look at how a single-name CDS is structured and examine the most common variations of credit default swaps.

7. Credit Derivatives - Credit Default Swap Valuation

The pricing and valuation of credit default swaps has evolved over time and today adopts a pricing method based on calculated arbitrage-free market price relationships. This method involves using zero-coupon discount factors, recovery rates and default probabilities to price a default swap. In this tutorial, you'll learn how to calculate zero-coupon discount factors and default probabilities and use these together with recovery rates to price a credit default swap. You will also learn how to determine the mark-to-market value of the swap and measure its corresponding price sensitivity.

8. Credit Derivatives - Total Rate of Return Swaps

A total rate of return swap (TRORS) is a credit derivative instrument that enables a counterparty to transfer the credit and market risk associated with a reference asset to another counterparty, without transferring the asset itself. TRORSs have many uses, including funding arbitrage, and represent an alternative to the repo market. This tutorial examines how total rate of return swaps are structured and priced, and describes the most common uses of these instruments.

9. Credit Derivatives - Credit-Linked Notes

The credit derivatives market has been growing at a rapid rate. This can be attributed to various factors, including the growth in the number of companies seeking new ways of funding and banks looking for new methods of risk transfer. This tutorial focuses on credit-linked notes, a customized credit derivative structure normally incorporating credit default swaps, but with some distinct features and variations as well.

10. Credit Derivatives - Credit Spread Options

The credit derivatives market has continued to grow at a rapid rate as credit markets mature, companies seek out new ways of funding and banks look for new methods of risk transfer. Credit derivatives appear in a number of guises - the focus in this tutorial is on credit spread option products. These are instruments designed to hedge against, or capitalize on, changes in credit spreads. There are a number of different spread measures used in the market. The focus in this tutorial is primarily on bond yield spread and credit default swap (CDS) spread measures used in credit spread option products.

11. Credit Derivatives - Basket Default Swaps

Credit default swaps (CDS) are the most common type of instrument used in the credit derivatives market. While most credit default swaps are single name, basket credit default swaps, in which the underlying consists of a basket of underlying credits, are growing in popularity. This tutorial focuses on basket CDS products, starting with the standard and most common basket CDS, the first to default (FTD) swap. Other variations, such as Nth to default baskets, are then described. The tutorial also discusses the pricing, hedging and other issues affecting these instruments.

12. Credit Derivatives - Synthetic CDOs

Synthetic collateralized debt obligations offer many advantages compared to their traditional counterparts. These include reduced capital market placement and total cost of issuance. In this tutorial, you will learn how synthetic CDOs are structured and the key determinants for valuing them. This tutorial also provides an introduction to single tranche collateralized debt obligations (STCDOs) and correlation trading.

13. Credit Derivatives - Capital Structure Arbitrage

Arbitrage refers to the opportunity that arises when similar assets are priced differently. Arbitrageurs can extract profits by selling short the overpriced security, or by buying the underpriced security. Capital structure arbitrage uses credit derivatives to exploit mispricings between a companys equity instruments and its debt instruments.This tutorial explains how capital structure arbitrage is conducted, and how structural models are used to identify arbitrage opportunities.

14. Securitization - Fundamentals

This tutorial examines in detail the main elements of the securitization process, providing information on a variety of topics including the main players involved in the process, costs and the complexity of securitization schemes.

15. Securitization - Mortgage-Backed Securities

Mortgage-backed securities (MBS) represent an ownership interest in mortgage loans made by financial institutions, such as savings and loans institutions, commercial banks and mortgage companies, to mortgagees. These securities are created when these loans are packaged, or pooled, by issuers for sale to investors. As property owners make repayments on the underlying mortgages, the investors receive payments of interest and principal. This tutorial examines in detail a variety of topics, including how the market developed and typical features and structures of mortgage-backed securities.

16. Securitization - Asset-Backed Securities

A relatively new but fast-growing segment of the debt market, asset-backed securities (ABS) are bonds or notes backed by financial assets, which normally consist of receivables other than mortgage loans. This tutorial examines in detail the different types of ABS and their practical use.

17. Securitization - CDOs - An Introduction

A collateralized debt obligation (CDO) is an investment grade security backed by a pool of loans, bonds or other securities. A CDO deal is broken into multiple tranches, each with separate maturity and credit risk, appealing to different classes of investors. Various forms of credit enhancement are used and CDO tranches are rated by the main credit rating agencies. CDOs represent the fastest growing segment of the securitization market and new product innovations, such as CDO-squared transactions, are continuously being introduced. This tutorial explains how CDOs are issued and structured, and outlines the common issuer and investor motivations for entering CDO deals.

18. Securitization - CDOs - Structures & Ratings

In terms of structure, there are two types of collateralized debt obligation (CDO): cash flow CDOs and market value CDOs. They differ crucially in the way collateral is used to generate cash flows to pay noteholders, in how the structure is credit -enhanced, and in how the underlying collateral pool is managed. The ratings process for these structures also differs.In this tutorial, we will examine the structural differences between cash flow and market value CDOs. We will also observe how these instruments are rated, which is crucial to the pricing of a CDO. Finally, we will look at some commonly used exotic CDO structures.

For more information visit http://www.researchandmarkets.com/reports/c28972