Credit Derivatives

Credit Derivatives September 11, 2009 By A. V. Vedpuriswar

Historical perspective on credit derivatives ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Historical perspective on credit markets ,[object Object],[object Object],[object Object],[object Object],[object Object]

Innovations from Banker’s Trust (1) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Innovations from Banker’s Trust (2) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Innovations from Banker’s Trust (2) cont.. ,[object Object],[object Object],[object Object],[object Object]

The emergence of Credit Default Swaps ,[object Object],[object Object],[object Object],[object Object],[object Object]

What is a CDS? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

CDS vs Insurance ,[object Object],[object Object],[object Object],[object Object],[object Object]

The Basics of CDS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Who is the reference entity? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Credit events ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

How much will be paid? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Cheapest to deliver bond ,[object Object],[object Object],[object Object]

Dynamic Credit Default Swap ,[object Object],[object Object],[object Object]

Credit Intermediation Swap ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Basket Credit Default Swap ,[object Object],[object Object],[object Object],[object Object]

Constructing a Basket Credit Default Swap ,[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object]

Credit Indices ,[object Object],[object Object]

CDS Indexes ,[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object]

Valuation of CDS ,[object Object],[object Object],[object Object],[object Object]

Related instruments ,[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],Related instruments

Total return swap ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object]

Credit linked notes ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Credit spread option ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Credit (Spread) Option ,[object Object],[object Object],[object Object],[object Object],[object Object]

Collateralised Debt Obligations ,[object Object],[object Object],[object Object],[object Object]

Synthetic CDO ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object]

Solution ,[object Object],Year Default probability Survival probability Discount factor (e -rt ) PV of expected payment 1 .02 .98 .9512 .9322 s 2 .0196 .9604 .9048 .8690 s 3 .0192 .9412 .8607 .8101 s 4 .0188 .9224 .8187 .7552 s 5 .0184 .9040 .7788 .7040 s 4.0705 s

Solution Cont.. ,[object Object],Time (Years) Probability of default Expected pay off Discount factor PV of expected pay off 0.5 .0200 (.6) (.02) = .0120 .9753 .0117 1.5 .0196 (.6) (.0196) = .0118 .9277 .0109 2.5 .0192 (.6) (.0192) = .0115 .8825 .0102 3.5 .0188 (.6) (.0188) = .0113 .8395 .0095 4.5 .0184 (.6) (.0184) = .0111 .7985 .0088 .0511

Solution Cont.. ,[object Object],Time (Years) Probability of default Expected accrual payment Discount factor PV of expected accrual payment 1 .0200 .0100 s .9753 .0097 s 2 .0196 .0098 s .9277 .0091 s 3 .0192 .0096 s .8825 .0085 s 4 .0188 .0094 s .8395 .0079 s 5 .0184 .0092 s .7985 .0074 s .0426 s

Solution Cont.. ,[object Object],[object Object],[object Object],[object Object]

Solution ,[object Object],[object Object],[object Object],[object Object],Year Probability of default Survival probability e -(.06)t Present value 1 .03 .97 .9418 .9135 2 .0291 .9409 .8869 .8345 3 .0282 .9127 .8353 .7624 4 .0274 .8853 .7866 .6964 3.2068

Solution (Cont..) ,[object Object],[object Object],Year Probability of default e -(.06)t Present value 0.5 .03 .9705 .0291 1.5 .0291 .9139 .0266 2.5 .0282 .8607 .0243 3.5 .0274 .8106 .02221 .1022

Solution (Cont..) ,[object Object],[object Object],[object Object],[object Object],[object Object],Year Probability of default e -(.06)t Present value 0.5 .03 .9705 .0291 1.5 .0291 .9139 .0266 2.5 .0282 .8607 .0243 3.5 .0274 .8106 .02221 .1022

Credit Derivatives

Recomendados

Recomendados

Mais conteúdo relacionado

Mais procurados

Mais procurados (20)

Destaque

Destaque (20)

Semelhante a Credit Derivatives

Semelhante a Credit Derivatives (20)

Mais de av vedpuriswar

Mais de av vedpuriswar (10)

Último

Último (20)

Credit Derivatives