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Topics Covered
Course Outline ·
Day 1– Morning: Key Ideas in Capital
Structure Arbitrage §
9:00 – 10:30: Introduction to Structured
Finance o
What are
Structured Finance Trades? o
What distinguishes
them from plain vanilla structures? o
Key drivers for
clients: tax, regulatory and accounting issues o
How Structuring
Can Add Value §
10:30 – 10:45: Break ·
Building Blocks 1: Equity Derivatives §
10:45 – 12:30: Recap on Equity Derivatives and Convertible Bond Structures o
Pricing Single
Stock Options o
Volatility Issues o
Dividend Risk and
Stock Borrow o
Basket Options and
Correlation o
Exotic Equity
Derivatives o
Convertible Bonds o
Convertible Asset
Swaps and CB Options 12:30 – 14:00: Lunch ·
Day 1– Afternoon: Building Blocks 2:
Interest Rate Derivatives §
14:00 – 15:30: Recap on Interest Rate and
Foreign Exchange Derivatives o
The Yield Curve o
Interest Rate
Swaps and Options o
Cross Currency
Swaps and FX Options o
Issues with Exotic
Currencies 15:30 – 15:45: Break ·
Example 1: Convertible Asset Swaps §
15:45 – 17:00: Detailed Example o
Synthetic FRN
Buyers Requirements o
CB Option Buyers
Requirements o
The key role of
Funding. o
How the Structure
Works o
Pricing and Risk
Management o
Call Risk ·
Day 2 – Morning: Building
Blocks 3: Credit Derivatives §
9:00 – 10:30: Recap on Credit Derivatives o
Default Swaps o
Credit Spread
Options o
Asset Swaps and
Total Return Swaps. The key role of
Funding. o
The Evolution of
Credit Derivatives from single reference bond to multiple deliverables. Documentation Risk. o
Key Legal Issues
and the cases of Railtrack, Conseco and JPMorgan/Mahonia o
Tranche Products
and the Characteristics of Equity Tranches 10:30 – 10:45: Break §
10:45 – 12:30: Introduction to Pricing
and Risk Management of Credit Derivatives o
Default
Probability, Recovery. What is in a
Credit Spread? o
Pricing Default
Swaps using Default Probabilities inferred from Credit Spreads: Methods and Pitfalls. o
Actuarial Pricing
and Ratings Transitions o
Documentation
Issues. o
Example: Using
Default Swaps in place of synthetic FRNs 12:30 – 14:00: Lunch ·
Day 2 – Afternoon: Example 2: On Demand
Capital §
14:00 – 15:30: Contingent Capital
Structures o
What is capital?
Need for contingent capital Solutions o
Example Contingent
Capital Structure o
Regulatory Issues
with Contingent Capital 15:30 – 15:45: Break §
15:45 – 17:00: Constraints on Effective
Structures o
Tax Issues o
Accounting Issues o
Regulatory Issues 15:30 – 15:45: Break ·
Example 3: Achieving Effective Accounting §
15:45 – 17:00:
Restructuring to Achieve Accounting Advantages o
Insurance vs.
Accrual vs. Mark to Market Accounting o
Introduction to
the changes to FAS 133 o
Restructing a
Trade to Optimise Accounting Treatment o
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