Fundamentals of the Credit Market Course

This training course aims to introduce key concepts and fundamental mechanisms of the credit markets (corporate and sovereign bonds, credit derivatives) and an overview of the most recent developments concerning these markets. 

Learning Objectives:

At the end of this session, participants will be able to:

• Define the Credit Market;
• Identify instruments traded in the market; 
• Demonstrate the process for creating an instrument in the market;
• List market participants in a Credit Market;
• Explain prudential guidelines, Moody and Morgan's Credit Metrics;
• Identify risks prevalent in several products and hedging methods;
• Demonstrate trading, delivery and settlement system

Course Outline

• Fundamental mechanisms of credit markets
• Credit events typology (overdraft, default), legal characteristics
• Agency ratings (S&P, Moody's), notions of bid/offer spread for bonds
• Payment default correlations within a credit portfolio
• Using transition matrices
• Prudential and accounting processing of credit instruments
• Corporate credit bond market
• Financial analysis and corporate risk assessment
• Introduction to corporate benchmarks : Merrill Lynch Investment Grade and high yield
• Bonds bid/offer spread determiners: theoretical models, empirical validations
• Sovereign bond market
• Macroeconomic analysis and determination of sovereign risk
• Introduction to the sovereign benchmarks: JP Morgan's EMBIG and GBI indices
• Determination of sovereign spreads: theoretical models and empirical validations
• Stress events management: contagion risk aversion
• Introduction to credit derivatives and structured products
• Credit Default Swaps (CDS) : characteristics and valuation
• Credit linked notes, Total return swaps, and spread-based options
• Collateralized Debt Obligations (CDO) : cash and synthetic
• Application: use of CDS in hedging and use of CDS in speculation