Were credit derivatives really at the heart of the financial crisis of 2008?

Although they probably played some role in the turmoil, at the end of the day, banks collapse when they lend to people that are either unwilling or unable to pay.  Our credit derivatives training programmes aim to shed some light on the suite of different available products.

We have also published a number of free primers which can be accessed here

Credit Default Swaps (CDS)

Although the market for single name and index CDS has shrunk since the financial crisis, we still see interest in this course.  Typically, participants are interested to learn how the product can be used either as a hedging tool or as a mechanism for expressing views on how the market is expected to move.  The basic features can be picked up relatively quickly but more detailed analysis of the valuation and risk management principles can be more challenging (e.g. PV01 and DV01).

Structured Credit

It is this sector of the market that some commentators argue was the source of many problems during the crisis.  Mention of the phrase ‘collateralised debt obligation’ can still cause people to break out in a sweat!  However, it was not really the product itself that was a problem but rather the quality of the assets that went into the ‘engine room’ of the instrument.  Also, some of the problems experienced by these instruments related to the concept of credit correlation – something practitioners have toyed with for many years and itself a source of controversy.

Credit Linked Notes (CLNs)

CLNs have become somewhat popular in recent times.  Many institutions have taken products and strategies of varying complexity (single name and index CDS, index ‘skews’ as well as index tranches) and packaged them in a format that makes them more easily understandable.

If you are interested in any credit derivatives topic, please get in contact with us for a chat!

One the company’s principals has written a textbook on the subject and is published by Wiley.  ‘Trading the fixed income, inflation and credit markets‘.