Econ of Credit Derivatives

3 Credits · Level: Graduate, Undergraduate

Econ 5803 provides a comprehensive overview of the economics of credit derivatives. The course will cover key principles from financial economics and apply them to the valuation of credit derivatives and related instruments. Students will develop a solid understanding of the various types of credit derivatives as well as how they are used in practice. The course is organized around five main themes: (1) the market for credit derivatives, including a discussion of the main uses, benefits, and risks of credit derivatives; (2) asset pricing principles, including replication strategies and risk-neutral valuation, that are most relevant for the pricing of credit derivatives; (3) analysis of various types of credit derivatives, with a special focus on credit default swaps; (4) overview of credit-risk modeling approaches for analyzing single-name and multi-name credit derivatives; and (5) documentation and regulatory issues surrounding credit derivatives.