Introduction

In an increasingly volatile global economy, managing credit risk is paramount for financial institutions and corporations alike. Beyond traditional risk mitigation through due diligence and collateral, sophisticated tools like credit insurance and derivatives provide powerful mechanisms to transfer, hedge, and manage exposure to counterparty default. Credit insurance, a well-established tool for protecting against non-payment, and credit derivatives, a more modern and flexible class of financial instruments, offer distinct but complementary solutions for navigating the complexities of modern finance. This advanced training course will give you a comprehensive understanding of these instruments and their applications.

This program provides a deep dive into the practical and theoretical aspects of credit insurance and derivatives. You will learn to analyze a range of instruments, including Credit Default Swaps (CDS), Total Return Swaps (TRS), and credit-linked notes. The course focuses on the valuation, pricing, and strategic use of these tools for portfolio management, capital optimization, and regulatory compliance. By the end of this training, you will be proficient in using these instruments to protect your portfolio, improve risk-adjusted returns, and gain a competitive edge in the financial markets.

Duration: 10 Days

Target Audience

• Financial risk managers
• Credit analysts
• Portfolio managers
• Structured finance professionals
• Corporate treasurers
• Investment bankers
• Insurance professionals
• Derivatives traders
• Regulatory compliance officers
• Capital markets professionals

Objectives

• Understand the core concepts of credit insurance and derivatives.
• Master the pricing and valuation of Credit Default Swaps.
• Learn to use these tools for hedging and risk transfer.
• Analyze the structure of credit-linked notes (CLNs).
• Develop strategies for portfolio credit risk management.
• Understand the regulatory implications of these instruments.
• Explore the role of synthetic collateralized debt obligations.
• Evaluate the benefits and risks of credit insurance.
• Differentiate between different types of credit derivatives.
• Apply these concepts in real-world case studies.

Course Modules

Module 1: Foundations of Credit Risk Management

• The evolution of credit risk management
• A review of traditional risk mitigation techniques
• The need for credit insurance and derivatives
• The concept of risk transfer and hedging
• An overview of the global credit markets

Module 2: Credit Insurance

• The basics of credit insurance policies
• The types of coverage and policy structures
• Pricing and underwriting credit insurance
• Claims and recovery processes
• The role of credit insurers in the market

Module 3: Introduction to Credit Derivatives

• A history of credit derivatives
• The core concepts of reference entities and triggers
• The difference between single-name and portfolio products
• The market for credit derivatives
• The role of ISDA in standardizing documentation

Module 4: Credit Default Swaps (CDS)

• The mechanics of a CDS contract
• The role of protection buyers and sellers
• Understanding the CDS curve
• The key factors influencing CDS spreads
• Settlement mechanics for CDS

Module 5: Pricing and Valuation of CDS

• An introduction to default probability models
• Using hazard rates to price a CDS
• The relationship between CDS spreads and bond yields
• Building a CDS pricing model
• The impact of interest rates and recovery rates

Module 6: Other Credit Derivatives

• Total Return Swaps (TRS) and their use cases
• Credit-linked notes (CLNs) and their structure
• First-to-default baskets and their risk profile
• Synthetic collateralized debt obligations (CDOs)
• The role of index products (e.g., CDX)

Module 7: Hedging with Credit Derivatives

• Hedging a corporate bond portfolio
• Using CDS to hedge loan and receivable exposure
• Managing counterparty credit risk
• The effectiveness of a hedge and basis risk
• The practical challenges of hedging

Module 8: Portfolio Credit Risk Management

• The importance of a portfolio view
• Using credit derivatives for active portfolio management
• Capital efficiency and regulatory arbitrage
• The role of diversification
• Building a portfolio of credit derivatives

Module 9: Trading Strategies

• The basics of directional trading in CDS
• Trading the basis between a bond and its CDS
• Using credit derivatives for arbitrage
• The role of leverage in trading
• Risk management for a trading desk

Module 10: Capstone Project Part 1: Design

• Defining a specific risk to be hedged
• Choosing the appropriate instrument (insurance vs. derivative)
• Mapping the data and analytical requirements
• Creating a detailed project plan
• Presenting the design to a mock review board

Module 11: Capstone Project Part 2: Development

• Implementing a CDS pricing model in a spreadsheet
• Using a model to evaluate a real-world scenario
• Analyzing the basis and hedging effectiveness
• Building a presentation to explain the analysis
• Documenting all assumptions and data sources

Module 12: Capstone Project Part 3: Presentation

• Presenting the full hedging strategy
• Discussing the risks and benefits of the approach
• Proposing a plan for implementation
• Q&A and peer feedback session
• Receiving expert recommendations and insights

Module 13: Regulatory and Accounting Implications

• The role of Basel IV in credit risk management
• The impact of credit derivatives on regulatory capital
• Accounting for derivatives under IFRS and GAAP
• The use of these instruments in financial reporting
• Preparing for regulatory and internal audits

Module 14: Emerging Trends

• The use of AI and machine learning in pricing
• The impact of non-financial risks on credit
• The rise of ESG-linked credit derivatives
• The use of blockchain in credit markets
• The future of the credit derivatives market

Module 15: Course Certification

• A final comprehensive assessment
• A final review of key concepts and objectives
• Issuance of a certificate of completion
• Post-course career guidance and networking
• A final Q&A with instructors

Training Approach

This course will be delivered by our skilled trainers who have vast knowledge and experience as expert professionals in the fields. The course is taught in English and through a mix of theory, practical activities, group discussion and case studies. Course manuals and additional training materials will be provided to the participants upon completion of the training.

Tailor-Made Course

This course can also be tailor-made to meet organization requirement. For further inquiries, please contact us on: Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Training Venue

The training will be held at our Skills for Africa Training Institute Training Centre. We also offer training for a group at requested location all over the world. The course fee covers the course tuition, training materials, two break refreshments, and buffet lunch.

Visa application, travel expenses, airport transfers, dinners, accommodation, insurance, and other personal expenses are catered by the participant

Certification

Participants will be issued with Skills for Africa Training Institute certificate upon completion of this course.

Airport Pickup and Accommodation

Airport pickup and accommodation is arranged upon request. For booking contact our Training Coordinator through Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Terms of Payment: Unless otherwise agreed between the two parties’ payment of the course fee should be done 10 working days before commencement of the training.