Legal and documentation aspects of credit derivatives

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One day course

Course Description

There has been increased focus on various credit derivative products, their documentation and settlement methods following defaults in recent times.  In July 2009 ISDA published a Supplement to the 2003 Credit Derivatives Definitions which introduced major changes to the operation of credit derivative transactions. 

This course provides keys to understanding the main credit derivative products, how they are documented and what happens if a Credit Event occurs.  There are practical exercises at the end of the day to put into practice knowledge learnt during the course.

Learning Objective

  • Review of the most common vanilla credit derivatives products and their documentation.
  • In-depth review of the 2003 ISDA Credit Derivatives Definitions incorporating the July 2009 Supplement.
  • Changes in market practice including the move to standard coupons and changes to standard Credit Events for certain Transaction Types.
  • Current status of central counterparties (CCPs) in the OTC derivatives market.

Who Should Attend

  • Credit Derivatives Documentation teams (Drafters and retrievals teams)
  • Derivatives Client Services Groups
  • Documentation Negotiators
  • Middle & Back Office operations staff
  • Derivatives Lawyers
  • Legal Counsel
  • Compliance
  • Credit Risk Managers

 Course outline

 1. General Overview  

  • History and evolution of the credit derivatives market.
  • Market Size.
  • Uses of credit derivatives.
  • Types of credit derivatives.  
  • Risks associated with credit derivatives.

2. Legal issues

  • The insurance question.
  • Gaming.
  • Netting.
  • Transferability.
  • Confidentiality (publicly available information). 
  • Selected causes celebres.

3. Documentation – the 2003 ISDA® Credit Derivatives Definitions and July 2009 Supplement 

  • A Glossary of Terms.
  • Credit Events.
  • Reference Entity and Successor Provisions.
  • Obligation Categories and Characteristics.
  • Deliverable Obligation Categories and Characteristics.
  • Existence of a Credit Event (Publicly Available Information).
  • Calculation Agent.
  • Settlement Procedures after Credit Event 
    - Auction Settlement. 
    - Physical Settlement. 
    - Cash Settlement.
  • Substitution of obligations.
  • Novation Provisions and Novation Protocols.

4. Significant developments since 2003

  • 2009 Credit Derivatives Determinations Committees, Auction Settlement and Restructuring Supplement (the "July 2009 Supplement").
  • The global move to standard coupons.
  • Regulators’ initiative to move CDS on to clearing systems or exchanges.
  • 60 Business Day Cap on Settlement.
  • 2005 Matrix Supplement and the Credit Derivatives Physical Settlement Matrix.
  • ISDA® Work in Progress.

5. Practical Exercise.

Training is charged at an agreed daily rate plus Value Added Tax.

ISDA® is a registered trademark of the International Swaps and Derivatives Association, Inc. The programme is neither sponsored by nor affiliated with the International Swaps and Derivatives Association, Inc.

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Great service / Good Knowledge transfer

"The main idea when planning the seminar was to get legal advice on a special niche of the derivatives documentation business through legal training tailored exactly to the needs of our bank. This allowed us to cover all the topics needed in a one day seminar.

Everyone who joined the course very much enjoyed it and found it very helpful. The knowledge transfer was further ensured by the brilliant transcript which now helps us in our day to day work. The seminar was worth every penny and added real value. It is left for me to say, thank you for the great service, the good knowledge transfer and your willingness to step in our shoes to identify our problems and needs when preparing the seminar."

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