Commodities, Derivatives and Structured Products

Credit Derivatives - Part 3 (2022)


This eCourse consists of three modules. Module 1 outlines the key features of the ISDA documentation framework and shows how auction settlement is used to determine recovery rates. ISDA framework is a well-understood and widely-accepted CDS documentation framework and a robust credit event auction system. It periodically adjusts in response to market challenges, has standardized trading practices and settlements. 

Module 2 explores the key relationship between different credit products, and introduces some of the lesser-known variations in the credit derivatives market.

Module 3 uses a scenario to examine how a regional bank with a credit portfolio concentrated in just four main sectors addresses this concentration risk in order to avoid a stock outlook or credit downgrade. The scenario explores how the bank can use single-name CDS to hedge existing exposures as well as gain exposure to a wide group of credits, thus diversifying its credit portfolio.


On completion of this course, you will be able to:
- Identify the documentation framework for credit default swaps and show how this framework has developed
- Interpret how auction settlement is used to determine recovery rates
- Recall the main clearing and risk management procedures for credit derivatives
- Recognise the key strategies used with CDS options and CDS index swaptions
- Recall how credit default swaps are used to transfer credit risk in synthetic CDOs
- Identify other key CDS variations, including CDS index ETFs, CDS (LCDS), recovery products, and constant maturity CDS (CMCDS)


Module 1: Credit Derivatives – CDS Documentation & Settlement
Topic 1: Credit Derivatives Documentation
Topic 2: CDS Auction Settlement
Topic 3: Clearing

Module 2: Credit Derivatives – Variations
Topic 1: CDS Swaptions
Topic 2: Synthetic CDOs
Topic 3: CDS Index ETFs
Topic 4: Other CDS Variations

Module 3: Credit Derivatives – CDS Scenario


Relevant Subject
Type 2 - Dealing in futures contracts
Type 5 - Advising on futures contracts
SFC:1.50, PWMA:1.50
Chinese Securities Association of Hong Kong (HKCSA): HK$505
Staff of Corporate Member: HK$480
All Member: HK$480
Non-Member: HK$720