Credit Risk in Derivatives Products

Master how derivatives work, how they're used and the inherent credit risks they pose to banks and their customers.

Shanghai skyline at night, tall buildings lit up in different colors

A two-day derivatives and risk management course

Book Places Now

Download: Course Outline

Overview of Derivatives / Major Market Players

Derivative Type

Exchange-Traded-Derivative (ETD) v Over-The-Counter (OTC)
Futures v Forwards
Options

Exercise: P&L on futures contracts
Exercise: Futures Strips
Case study:

Credit Risk Reduction in ETDs
Margining & Central Counterparties (CCPs)

Exercise: Currency Forward - calculating the forward points
Case study: Hedging with NDFs

The Yield Curve

IRSs

Understanding the IRS and their use
Pricing and IRS
IRSs trading on an OTF/SEF at the CCP

Exercise: Calculating the P&L
Exercise: Multilateral netting

Credit Default Swaps (CDS) Overview

How CDS trade
Standardisation of contracts for Netting

Exercise: Bloomberg Pricing and Credit Risk

How Counterparty Risk is Different for Derivatives

Credit Risk

Default Risk
Corporate Credit Ratings
Credit Spread Calculations
Derivatives and credit risk… Counterparty Credit Risk

Exercise: considering credit ratings and credit spreads

Counterparty Risk Calculation and FX Forwards

Herstatt Risk and CLS
Payment Vs Payment Netting

Exercise: Valuing a counterparty exposure on an option

Counterparty Risk for IRSs

Derivatives and Risk Management Course Exercise: calculating the CVA risk for an IRS

Basic Calculations of CVA (Credit Value Adjustments) and DVA (Debit Value Adjustments)

Current Exposure, Expected Exposure (EE) and Potential Exposure (PE)

Credit Derivative Spread and CVA

Exercise: calculating the CVA risk

Adjustments for Funding (FVA)

Case study: Equity Derivatives Example

ISDA Master Agreements

How does the Master Agreement work?
CSA (Credit Support Annex)

Swap Unwinds

Evaluation of Counterparty Exposure
Netting and the CCP
How Compression Works
Close-Out Netting
Collateral Transformation and Optimisation
What if a CCP goes bust?

Collateral Management

How does Collateral Management work?
Collateral transfers
Margin Calls
Threshold
Minimum Transfer Amount (MTA)

Cleared, Uncleared and Margin Trades

MPoR (Margin Period of Risk)
IM & VM Rules for Uncleared Derivatives
IM Segregation at a Custodian
AANA (Average Aggregate Notional Amounts)
Trade Life Cycle…comparison of OTC trades

Course Quiz

Delegates will take a quiz to cement their understanding. We mark the quiz and finish by discussing any areas you may have found difficult so that you leave with a thorough understanding of the topics covered.

Redcliffe credit derivatives course trainer has worked in Investment Banks for 20 years, including HSBC and Bank of Montreal. During this time, he worked in Operations and then as a trader, running books in FX, bonds and derivatives.

He held the position of Non-Executive Director of Cazenove’s Derivative Oversight Committee for many years. He acted as a member of the committee in a general consultative capacity to assess the firm’s derivative capabilities and manage risks.

He has presented at JPMorgan Forums in London, speaking on topics such as the Benefits and Risks of Derivatives. He, along with representatives from the FCA, law firms and hedge funds, gave their views on the risks of derivatives to >150 Directors and senior managers from top investment firms in the UK.

Besides his derivatives and risk management course activities, he has undertaken various consultancy projects, such as an in-depth collateral risk assessment at a major European Investment bank.

Our trainer delivers courses that provide a practical and in-depth understanding of the markets from a trading, operations and financial risk viewpoint. His courses are interactive, stimulating, and offer delegates the opportunity to take part in an environment which encourages free discussion of the real issues faced in the workplace.

He has run courses worldwide, including Amsterdam, Dublin, London, New York, Hong Kong, Singapore, Jakarta, Johannesburg, Delhi, Accra and Johannesburg.

Redcliffe Training's Credit Risk in Derivatives Products course teaches Counterparty Risk and how it occurs in derivatives.
We look at individual derivative types and examine how financial market risk creates credit risk.
Understand how credit risk in Futures is largely mitigated through margining. Learn what risks remain in the “real world”.
How credit risk occurs in all the major derivative products.
Appreciate how credit risk exposure mitigation can reduce risk. This includes netting, unwinds, collateral transformation, margins, and trade compression.
Gain knowledge of financial derivatives, credit risk exposure calculations, such as:
- Expected exposure
- Potential exposure
- CVA and CVX
How Electronic trading strategies through SEFs/OTFs and the CCP have reduced credit risk by over 95% for “cleared trades”.

Although mathematics is essential in credit derivative markets, all case studies and exercises are explained with the use of a simple calculator. You DON’T need to be a mathematician to understand these concepts!
This credit derivatives course will allow you to become familiar with the major derivative products and how banks and their clients use them.
You will also learn about “Counterparty Risk”, the increase in “Multilateral Netting” through “CCPs”, the use of collateral and other methods. They are a crucial tool in the reduction of credit risk derivatives.
We will drill down into how to calculate CVA (Credit Value Adjustments) and the role of DVA (Debit Value Adjustments) and FVA (Funding Value Adjustments) in derivatives pricing today.
We will also cover all the important products and topics, including Futures, IRS and CDS, Options and Collateral, as well as ISDA documentation.

This derivatives and risk management course is a must-know for:

Asset Managers
Credit Risk
Middle Office
Compliance
Professionals wanting to understand derivative products and their credit counterparty risk

Redcliffe Training's credit derivatives course will give you an in-depth understanding of how credit risk occurs in derivative products. Learn how the products work on a practical basis, with illustrations of how counterparty credit risk occurs and how to measure it. Credit mitigation techniques are fully explored in this training.

Very happy to hear personal experiences and stories from the moderator, besides the course agenda.
The course was very interesting and well presented by the trainer. He was able to explain all the topics and able to get an answer to all the questions and leverage a lot of practical examples from the real world.
It was presented well and felt like time was well spent. Met expectations overall as I wanted a deeper understanding of these topics.
I think the explanation of options and derivatives was interesting and useful. This will help me better get to know the type of trades client. The trainer was very willing to engage in discussions and Q&A.

REQUEST CALL BACK