Commodities, Derivatives and Structured Products

Credit Derivatives - Part 1 (2022)


This eCourse consists of two modules. Module 1 outlines the basics of credit derivatives and examines the structure of a basic credit derivatives trade, known as a credit default swap (CDS). Other topics covered include the development of the market pre- and post-financial crisis, and the risks associated with undertaking credit derivatives transactions.

Module 2 outlines the key features and trading practices surrounding single-name CDS. A single-name CDS is a credit default swap where there is only one reference entity, typically a corporate or sovereign. The buyer of protection in a single-name CDS makes periodic premium payments to the seller of protection in return for credit protection.


On completion of this course, you will be able to:
- Recognise how credit derivatives are used to transfer credit risk and how they differ from insurance
- List the main types of credit derivative, including single and multi-name CDS, total return swaps, and credit-linked notes
- Identify the key features of credit derivatives such as agreed and contingent payments, upfront payments, protection buyers and sellers, reference entities and obligations, protection periods, credit events, and determination committees
- Recognise how credit risk and interest rate risk are unbundled in credit derivatives
- List the main factors that affect CDS prices
- Recall the development of the credit derivatives market and the main market participants
- Recognise the basic structure of a single-name CDS
- List the key features of single-name CDS, including maturities, roll dates, lookback periods, and fixed coupons
- Recall how upfront payments are based on accrued interest and the differences between the market spread and the standard coupon
- Recognise the main documentation and regulatory requirements as they apply to single-name CDS
- Identify the main features of the restructuring credit event


Module 1: Credit Derivatives – An Introduction
Topic 1: Overview of Credit Derivatives
Topic 2: Types of Credit Derivative
Topic 3: Features of Credit Derivatives
Topic 4: Risk & Credit Derivatives
Topic 5: CDS Pricing
Topic 6: Market Dynamics

Module 2: Credit Derivatives – Single-Name CDS
Topic 1: Overview of Single-Name CDS
Topic 2: Key Features
Topic 3: Upfront Payments
Topic 4: Documentation & Regulation
Topic 5: Restructuring Credit Event


Relevant Subject
Type 2 - Dealing in futures contracts
Type 5 - Advising on futures contracts
SFC:1.50, PWMA:1.50
All Member: HK$460
Staff of Corporate Member: HK$460
Non-Member: HK$665