信用衍生性商品 Credit Derivatives - dwfutures.com
Transcript of 信用衍生性商品 Credit Derivatives - dwfutures.com
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大纲 Agenda
信用评级 Credit Ratings信用利差 Credit Spread信用衍生性商品 Credit Derivatives信用违约交换 Credit Default Swap (CDS)总收益互换 Total Return Swap (TRS)信用联结票据 Credit Linked Note (CLN)抵押债务债券担保债务凭证
Collateralized Debt Obligation (CDO)固定比例债务债券
Constant Proportion Debt Obligation (CPDO)固定比例投资组合保险债券
Constant Proportion Portfolio Insurance (CPPI )双币别衍生品 Quanto双币别衍生品交换 Quanto Swap
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Credit Ratings
信用评级
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信用评级公司 Credit Rating Agencies
Standard & Poor's (S&P) (40%): USA
Moody's (40%): USA
Fitch Group (15%): 50%USA (Hearst Corporation) and 50% France (FIMALAC )
Source: DTCC, ISDA
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信用评级 Credit Ratings
IG
Investment
Grade
IG
Junk
High Yield
HY
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投资级/垃圾级债券 Investment Grade / Junk Bonds
A bond is considered Investment Grade or IG if its credit rating is BBB- or higher by Standard & Poor's or Baa3 or higher by Moody's.
Bonds that are not rated as investment-grade bonds are known as High Yield bonds or more derisively as Junk bonds.
Source: DTCC, ISDA
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标准普尔国际评等 Standard & Poor's Foreign Ratings
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标准普尔3A级评等Standard & Poor's AAA Rating Countries
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标准普尔中国评等 Standard & Poor's China Rating: AA-
http://www.standardandpoors.com/ratings/sovereigns/ratings-list/en/us/?subSectorCode=39
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标准普尔 一年期全球企业破产机率S&P’s One-Year Global Corporate Default Rates (%), 1981-2008
One-Year Global Corporate Default Rates (%)
0.00 0.00 0.02 0.03 0.05 0.06 0.08 0.16 0.28 0.28 0.68 0.89 1.532.44
7.28
9.97
22.67
0
5
10
15
20
25
AAAAA+
AAAA-
A+ A A-
BBB+BBB
BBB-BB+ BB
BB-B+ B B-
CCC to C
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Credit Spread
信用利差
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信用利差 Credit Spread
Consider a corporate bond matured T years from nowr: risk free rates: credit spreadp: default probabilityR: recovery rate1 – R = Loss Given Default (LGD)
1 dollar matured T years from nowprobability = p, Default, get R back probability = 1 - p, No Default, get 1 back
Present value of 1, T years from now is EXP(-(r+s)*T)
EXP(-(r+s)*T) = (1-p)*EXP(-r*T) + p*R*EXP(-r*T)
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信用利差 Credit Spread
EXP(-(r+s)*T) = (1-p)*EXP(-r*T) + p*R*EXP(-r*T)= EXP(-r*T) - p*EXP(-r*T) + p*R*EXP(-r*T)= EXP(-r*T)*(1 – p + p*R)
EXP(-r*T) * EXP(-s*T) = EXP(-r*T)*(1 - p*(1-R))EXP(-s*T) = 1 - p*(1-R)-s*T = LN(1 - p*(1-R))
s = -1/T * LN(1 - p*LGD)
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信用利差 Credit Spread
s = -1/T * LN(1 - p*LGD)
Bigger Default ProbabilityBigger Credit Spread
Bigger Loss Given DefaultBigger Credit Spread
Longer MaturitySmaller Credit Spread
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Credit Derivatives
信用衍生性商品
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信用衍生性商品 Credit Derivatives
Credit Derivatives’ prices depends on Credit conditions.
Credit Risk Management
Credit Risk Trading
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信用衍生性商品 Credit Derivatives
Unfunded – without principal
Funded – with principal
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信用衍生性商品 (无本金) Credit Derivatives - Unfunded
Credit default swap (CDS)
Total return swap (TRS)
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信用衍生性商品 (有本金) Credit Derivatives - Funded
Credit linked note (CLN)
Collateralized Debt Obligation (CDO)
Constant Proportion Debt Obligation (CPDO)
Constant Proportion Portfolio Insurance (CPPI)
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Credit Default SwapCDS
信用违约交换
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信用违约交换 Credit Default Swap (CDS)
A Credit Default Swap (CDS) is a bilateral agreement designed explicitly to shift credit riskbetween two parties.
In a CDS, one party (protection buyer) pays a periodic fee to another party (protection seller) in return for compensation for default (or similar credit event) by a reference entity.
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信用违约交换结构 CDS Mechanics
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信用违约交换结构 (事件发生前) CDS Mechanics – pre Credit Event
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信用违约交换结构 (事件发生后) CDS Mechanics – post Credit Event
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信用违约交换 利差 CDS Spread
If the CDS spread of XYZ Corp is 50 basis points, or 0.5% (1 basis point = 0.01%), then an investor buying $10 million worth of protection from ABC Bank must pay the bank $50,000 per year.
$10,000,000 X 0.0001 X 50 = $50,000
$1000 per basis point for $10 million notional CDS
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信用违约交换 强化金融体制 CDS strengthen the financial system
CDS enable banks to transfer risk to other risk takers, so banks can make more loans.
CDS help distribute risk widely throughout the system and thus prevent large concentrations of risk that otherwise would occur.
CDS provide important information about credit conditions, helping bankers and policymakers to supervise traditional banking activities.
CDS serve a valuable signaling function—CDS prices produce better and more timely information.
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信用违约交换 (合约) CDS contract
a confirmation referencing the credit derivatives definitions as published by the International Swaps and Derivatives Association (ISDA)
reference entityreference obligationeffective date and scheduled termination datecalculation agent credit events deliverable obligation characteristics premium payments
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目标主体 Reference Entity
The Reference Entity is the party on which CDS is written.
For the simplest (single-name) form of CDS, the reference entity is an individual corporation or government.
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目标债权 Reference Obligation
Unsubordinated corporate bondGovernment bond.
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信用事件 Credit Event
With regard to credit events, the confirmation of a CDS deal specifies a standard set of events, one of which must occur before the protection seller compensates the buyer.
The parties to the deal decide which of those events to include and which to exclude.
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信用事件 Credit Events
Failure to pay
Bankruptcy
RestructuringCoupon reductionMaturity extension
Repudiation or Moratorium
Obligation Acceleration and Obligation Default
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清算 Settlement
Physical settlement: The CDS seller pays the buyer par value, and in return takes delivery of a debt obligation of the reference entity.
Cash settlement: The CDS seller pays the buyer the difference between par value and the market price of a debt obligation of the reference entity.
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收覆率 Recovery Rates
CDSRecovery Rate = 40%
LCDS (Loan CDS)Recovery Rate = 70%
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收覆率拍卖 Recovery Rate Auctions
International Swaps and Derivatives Association (ISDA)
Source: DTCC, ISDA
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信用违约交换 (利差与破产机率)CDS Spread and Probability of Default
Consider a 1-year CDS contract and assume that the total premium is paid up frontLet S: CDS spread (premium), p: default probability, R: recovery rate
The CDS buyer expects to pay = SHis expected pay-off = (1-R)pWhen two parties enter a CDS trade, S is set so that the value of the swap transaction is zero
S = (1-R)p ↔ S / (1-R) = pIf R = 40%; S = 500 bp ↔ p = 8.3%.If R = 0, S = p = 5%
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Bloomberg WCDS (全球CDS评价 World CDS Pricing)
Source: DTCC, ISDA
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Source: DTCC, ISDA
Bloomberg WCDS (全球CDS评价 World CDS Pricing)
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Bloomberg CDSD (利差曲线 CDS SPREAD CURVE)
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Bloomberg CDSW (计算器 CDS Calculator)
Market Spread
Upfront payment
Accrued Interest
CDX spread
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Bloomberg CDSH (历史利差 CDS Historical Spreads)
Source: DTCC, ISDA
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欧猪五国 PIIGS CDS – 2011/04/20
10Y CDS
Greece: 1240bp
Portugal: 661bp
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欧债危机 European Sovereign CDS – 2012 October
10Y CDS
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毛名目本金 Gross Notional
Gross notional values are the sum of CDS contracts bought (or equivalently sold) for all Warehouse contracts in aggregate, by sector or for single reference entities displayed.
Aggregate gross notional value and contract data provided are calculated on a per-trade basis. For example, a transaction of $10 million notional between buyer and seller of protection is reported as one contract for $10 million gross notional, as opposed to two contracts for $20 million notional.
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净名目本金 Net Notional
Net notional values with respect to any single reference entity is the sum of the net protection bought by net buyers (or equivalently net protection sold by net sellers).
Net notional positions generally represent the maximum possible net funds transfers between net sellers of protection and net buyers of protectionthat could be required upon the occurrence of a credit event relating to particular reference entities (actual net funds transfers are dependent on the recovery rate for the underlying bonds or other debt instruments).
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名目本金 Notional Amount - 2011/12/31
Gross Notional Amount: $25.9 trillion
Net Notional Amount: $2.7 trillionEvery Reference Entity has a Credit EventRecovery Rate = 0
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案例 Top 10 CDS Positions – Gross Notional – 2012/11/10
Source: DTCC, ISDA
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案例 Top 10 CDS Positions – Net Notional – 2012/11/10
Source: DTCC, ISDA
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中央清算 Central Clearing
Central Counterparty clearing facilities (CCPs)ICE Trust and ICE Clear Europe, both operated by the IntercontinentalExchangeCME Clearing, owned by CME GroupEurex Credit Clear, operated by EurexFrankfurt AGLCH.Clearnet
85 percent of CDS trading90 percent of IRS trading
Source: DTCC, ISDA
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中央清算 Central Clearing
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个别公司信用违约交换 Single Name CDS – 2012/10/24
Source: DTCC, ISDA
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个别公司信用违约交换报价Last Quote for the most Liquid Credit Default Swaps
http://www.markit.com/cds/most_liquid/markit_liquid.shtml 1000 CDS and several Markit CDS Indices
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Markit CDX indices
Markit CDX North American Investment Grade (125 names)
Markit CDX North American Investment Grade High Volatility (30 names from CDX NA IG)
Markit CDX North American High Yield (100 names)
Markit CDX North American High Yield High Beta (30 names)
Markit CDX Emerging Markets (15 names)
Markit CDX Emerging Markets Diversified (40 names).
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Markit CDX indices信用违约交换指数
Source: DTCC, ISDA
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Markit CDX Fixed Coupon Rates 信用违约交换票面利率指数
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Markit iTraxx Europe indices 信用违约交换欧洲指数
Markit iTraxx Europe index (125 equally-weighted European names)
Markit iTraxx Europe HiVol index (30 widest spread non-financial names)
Markit iTraxx Europe Crossover index (40 most liquid sub-investment grade entities)
Markit iTraxx Europe Non-Financial index Markit iTraxx Europe Senior Financials index Markit iTraxx Europe Sub Financials index
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Markit iTraxx CEEMEA index 信用违约交换指数
Markit iTraxx CEEMEA index (25 corporate and quasi-sovereign entities from Central & Eastern European, Middle Eastern and African countries)
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Markit iTraxx Asia Pacific indices 信用违约交换亚太指数
Markit iTraxx Asian ex-Japan IG index (50 equally-weighted investment grade Asian entities)
Markit iTraxx Australia index (25 equally-weighted Australian entities)
Markit iTraxx Japan index (50 equally-weighted CDS of Japanese entities).
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案例 Markit CDX and iTraxx Indices – 2012/11/19
Source: DTCC, ISDA
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信用违约交换风险 CDS Risks
Counterparty riskfrom Lehman Brothers
Liquidity risk
Jump-to-default risk
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美国政府接管二房
案例 Lehman Brothers 1Y CDS
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美国政府接管二房
案例 Lehman Brothers 5Y CDS
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信用违约交换用法 CDS Uses
SpeculationBuy Low; Sell HighSell High; Buy Low
Hedging
ArbitrageStock ↑ CDS Spread ↓Stock ↓ CDS Spread ↑Exception: Leveraged Buyout (LBO)
Stock ↑ & CDS Spread ↑
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Negative Basis Trades
CDS Spread < Bond SpreadBuy Bond & Buy CDS
Good, ButCounterparty Credit RiskUnwinding Risk
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Negative basis Trades – 2009/10
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案例 JP Morgan Chase - London Whale
Bruno Iksil, a Soviet-born trader bullish on credit markets and sold Markit CDX North America Investment Grade Series 9 10-Year Index, CDX IG 9
2 Billion Loss reported in May 20125.8 Billion Loss updated on July 13, 2012
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一篮子信用违约交换 Basket Credit Default Swap
A credit derivative contract that provides a payoff when any of the multiple reference entities default. The contract specifies the number of defaults after which the payoff is generated.First-to-default (FTD) CDSSecond-to-default (STD) CDSNth-to-default CDS.
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信用违约交换组合 Portfolio Credit Default Swap
Portfolio CDS covers a prespecified amountrather than a prespecified sequential default number (first-to-default, second-to-default, and so on).$10 million CDS
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信用违约交换 Digital Credit Default Swap
Fixed-recovery CDSRecovery rate is fixed beforehand
Binary CDS
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信用违约交换 指数利差交易策略 CDS Index Spread Trading
iTraxx Europe – CDX NA IG
If European sovereign-debt crisis is getting worseBuy iTraxx Europe; Sell CDX NA IG
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信用违约交换 个别公司利差交易策略Single Name CDS Long-Short Trading
Tokyo Electric Power
Kansai Electric Power
Buy Tokyo ; Sell Kansai Electric Power Sell Tokyo ; Buy Kansai Electric Power
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信用违约交换 个别公司利差曲线交易策略Single Name CDS Curve Trading
Keep Notional equal, no Default risk, but MTM risk1M 5Y CDS Spread01 ¥449, 1Y CDS ¥111
1Y: 650bp
5Y:417bp
If betting CDS Curve is flattening,
then Sell 1Y CDS, Buy 5Y CDS
Tokyo Electric Power
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Keep spread01 equal, no MTM risk, but Default risk 1M 5Y CDS Spread01 ¥449, 1Y ¥111 (5Y:1Y= 1M:4.05M); net of 3.05M credit exposure
1Y: 650bp
5Y:417bp
If betting CDS Curve is flattening,
then Sell 1Y CDS, Buy 5Y CDS
Tokyo Electric Power
信用违约交换 个别公司利差曲线交易策略Single Name CDS Curve Trading
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Total Return SwapTRS
总收益互换
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总收益互换 Total Return Swap (TRS)
Total return swap, or TRS Total rate of return swap, or TRORS
one party makes payments based on a set rate, either fixed or variable the other party makes payments based on the return of an underlying asset, reference assetincome capital gain
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总收益互换 Total Return Swap (TRS)
A TRS is made up of two legsthe Return Leg (or Total Return Leg)the Funding Leg.
The Return Leg is generally made up of two components: cash flows and capital appreciation of the reference asset(s).
The Funding Leg also has two components: floating coupons based on LIBOR +/- a spread and payments to offset any capital depreciation of the reference asset(s).
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总收益互换 Total Return Swap (TRS)
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总收益互换 (付方) Total Return Payer (TRP)
The Return Leg counterparty is called the Total Return Payer, Swap Seller, Buyer of protection, or Beneficiary.
Owns reference asset(s) Has lower cost financing Pays total return of asset(s) Receives LIBOR +/- spread Receives payments to offset any capital losses Takes on interest rate risk Transfers away asset return risk
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总收益互换 (收方) Total Return Receiver (TRR)
The Funding Leg counterparty is called the Total Return Receiver, Swap Buyer, Seller of protection, or Guarantor.
Does not own reference asset(s) - has a weaker balance sheet or uses balance sheet leverage Has higher cost financing Receives total return of asset(s) Pays LIBOR +/- spread Pays for any capital losses Takes on asset return risk Takes on interest rate risk
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总收益互换 Total Return Swap Example
In a Bank Loan TRS, a large bank such as Citigroup (the Total Return Payer) owns a loan(s). It then enters into a TRS with an investor (the Total Return Receiver). The bank pays all the interest and realized capital gains to
the Seller, minus a "funding charge" (akin to an access fee to the bank's balance sheet). The investor pays LIBOR plus a spread, plus any realized
capital losses to the bank.
Initial collateral (the "haircut" or "Independent Amount" in swap language) of between 15% and 80% is paid to the bank by the investor at the inception of the TRS. The bank holds this collateral in a separate account and pays the investor periodic interest at the Fed Funds Effective Rate.
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总收益互换 (收方)Payments Received by Total Return Receiver
If reference asset is a bond, the bond coupon
The price appreciation, if any, of the reference asset since the last fixing date
If the reference asset is a bond that defaulted since the last fixing date, the recovery value of the bond
Interest on any collateral / haircut being held by the Total Return Payer
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总收益互换 (付方)Payments Received by the Total Return Payer
The periodic floating payment (usually LIBOR +/- a spread)
The price depreciation, if any, of the reference asset since the last fixing date
If the reference asset is a bond that defaulted since the last fixing date, the par value of the bond
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总收益互换 (收益) Total Return Swap Benefits
Leverage – Initial Collateral
A synthetic funding instrument - improved financing costs
Operational efficiency – TRS Payer
Flexibility
Access to otherwise inaccessible asset classesLoans
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总收益互换 (风险) Total Return Swap Risks
Investment Return Risk
Interest Rate Risk - LIBOR
Liquidity Risk
Counterparty Risk
Bankruptcy Risk – Reference Asset(s)
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总收益互换 (合约文件) Total Return Swap Documentation
International Swaps and Derivatives Association (ISDA www.isda.org) Master Agreement and Schedule, which governs swaps between two parties.
Credit Support Annex (CSA), where the parties set forth the agreed collateral and credit terms.
The Swap Confirmation ("Confirm") is usually a customized document. The Confirm sets the actual trade terms of the TRS, which may vary widely depending on the reference asset(s) and parties.
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Credit Linked NoteCLN
信用联结票据
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信用联结票据 Credit Linked Note (CLN)
Credit Linked Note Buy a Bond from a Investment BankSell CDS on another Reference Entity
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信用联结票据 Credit Linked Note (CLN)
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信用联结票据 Credit Linked Note Examples
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信用联结票据 Credit Linked Note Credit Risks
Counterparty Risk
Reference Entity Risk
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USA Real Estate Bubble美国房市泡沫
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2002
2012
美国房市泡沫 USA Real Estate Bubble Peaked in 2006
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忍者贷款 Ninja Loans
No Income, No Job, and no Assets. NINJA loans are often defaulted on, with the borrower disappearing like a ninja.
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美国房市泡沫 USA Real Estate Bubble Peaked in 2006
One Bed Room Apartment in New York City
Rent$3000
Buymonthly mortgage, maintenance and taxes > $6000
Why Buy, not Rent?
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Everybody thinks the prices are High
Most people think the prices will stay high
美国房市泡沫 USA Real Estate Bubble Peaked in 2006
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Collateralized Debt ObligationCDO
抵押债务债券担保债务凭证
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抵押债务债券 担保债务凭证Collateralized debt obligation (CDO)
Collateralized debt obligations (CDOs) are a type of structured asset-backed security (ABS) with multiple "tranches" that are issued by special purpose entities (SPV) and collateralized by debt obligations including bonds and loans. Each tranche offers a varying degree of risk and return so
as to meet investor demand. CDOs' value and payments are derived from a portfolio of
fixed-income underlying assets. CDO securities are split into different risk classes, or
tranches, whereby senior tranches are considered the safest securities. Interest and principal payments are made in order of seniority, so that junior tranches offer higher coupon payments (and interest rates) or lower prices to compensate for additional default risk.
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抵押债务债券 担保债务凭证 – 金流CDO Cash Flow Diagram - Simplied
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不动产抵押债券Residential Mortgage Backed Security (RMBS)
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Residential Mortgage Backed Security (RMBS)Subprime mortgage crisis: 2007/7 -
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CDO – IMF Diagram
Source: DTCC, ISDA
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CDO ^ 2
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抵押债务债券 担保债务凭证- 不同抵押品Types of CDOs – Different Collaterals
Collateralized loan obligations (CLOs) —leveraged bank loans.
Collateralized synthetic obligations (CSOs) —credit derivatives.
Structured finance CDOs (SFCDOs) — structured products (such as asset-backed securities and mortgage-backed securities)
Commercial Real Estate CDOs (CRE CDOs) —commercial real estate assets
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Collateralized bond obligations (CBOs) —corporate bonds
Collateralized Insurance Obligations (CIOs) —insurance or, more usually, reinsurance contracts
CDO-Squared — tranches issued by other CDOs.
CDO^n, Generic term for CDO^3 (CDO cubed) and higher — CDOs/CDO^2/CDO^3.
抵押债务债券 担保债务凭证- 不同抵押品Types of CDOs – Different Collaterals
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抵押债务债券 担保债务凭证- 生命周期CDO Life Cycle
1.Ramp-up phase, when the manager uses the proceeds from issuing the CDO to purchase the initial portfolio. The CDO's governing documents generally specify parameters for the initial portfolio but not the exact composition.
2.Reinvestment phase, during which the manager actively manages the portfolio and reinvests cash flow from the portfolio.
3.Amortization phase, during which the manager must apply the cash flow toward repaying the CDO's debt securities.
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抵押债务债券 担保债务凭证- 检测CDO Performance Tests
Asset Quality Testsminimum weighted average rating (WAR) testIndustry and obligor limitsminimum weighted average coupon (WAC) testcumulative maturity distribution test
Cash Flow Coverage TestsOvercollateralization, OC, test, the ratio of the portfolio balance to the balance of the CDO's debt securitiesInterest coverage, IC, test, the ratio of interest cash flow on the portfolio to the interest that the CDO must pay on its own securities.
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抵押债务债券 担保债务凭证- 结构CDO Building Blocks
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抵押品经理人 Collateral Manager
Portfolio or Asset manager
Collateral manager’s primary functions Sell investments in the collateral pool that may lose value, default or become impairedBuy investments with attractive yields and a favorable investment outlook.
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抵押品管理 Managed CDO - Example
投资组合之交易更换原则 Limit
同一公司持有上限 (BBB- 以上) [2.0]%
同一公司持有上限(BB+ 以下) [1.0]%
同一产业持有上限(非银行或金融业) [20.0]%
同一国家持有上限(非欧美国家) [20.0]%
替换 (每年) [不限]
其他原则 Limit
Fitch Dynamic Portfolio Guidelines 适用
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投行的3个角色Investment Bank (Arranger, Underwriter and Placement Agent)
the Arranger will organize meetings between investors and a collateral manager in order to discuss a potential transaction
the investment bank may advise the collateral manager concerning rating agency requirements or apprise them of the specific nuances of certain investors.
As Underwriter and Placement agent, the investment bank is responsible for the orderly execution and delivery of the promised bonds.
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信托公司的3个角色Trustee (Trustee, Custodian, Paying Agent)
the Trustee for a CDO transaction is custodian of the collateral and protects investors’ security interests by ensuring that transaction covenants are honored. Evaluation of the trade recommendations of the collateral manager in order to ensure compliance with deal covenantsRelease or receipt of cash or securities (from trading activities, for example), Distribution of cash to investorsCreation and distribution of deal surveillance reports.
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信用评等公司 Rating Agencies
Assign credit ratings to different parts of the CDO capital structure based on their perceived levels of risk. Moody’s Investors ServiceStandard & Poor’sFitch Ratings Ltd
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投资者 Investors
CDO investors are typically sophisticated institutional investorsInsurance companiesMoney managersBanksPension fundsHedge fundsAsset-backed commercial paper conduits.
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避险对手方 Hedge Counterparty
The hedge counterparty is generally a highly rated investment or commercial bank that enters into an interest rate swap, currency swap, liquidity swap or another type of basis swap for the purpose of removing non-credit-related risk from the CDO transaction.
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信用保证人 Credit Enhancer
The credit enhancer is generally a monoline bond insurer that is paid an upfront and/or ongoing fee to insure a class of CDO securities against losses.
American International Group, AIG
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美国政府为什么救AIG
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特别目的公司 Special Purpose Vehicle (Issuer)
The issuer of CDO transactions is a bankruptcy-remote special-purpose vehicle (SPV) located in a tax-friendly jurisdiction.
The SPV purchases securities which will comprise the collateral poolissues CDO securities.
Because the operation of the SPV is precisely defined in the indenture, there is no need for employees and therefore it has none.
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CDO Types抵押债务债券 担保债务凭证 品种
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固定vs.浮动Static vs. Managed CDOs
Static CDO: Collaterals stay the same
Managed CDO: Collaterals change
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金流 vs. 市值Cash Flow vs. Market Value CDOs
Cash Flow CDO use cash flow from the collateral to pay the CDO investors
Market Value CDO can sell collateral to pay the CDO investors
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资产负债表vs.套利Balance Sheet vs. Arbitrage CDOs
Balance Sheet CDO takes collateral off a bank’s balance sheet
Arbitrage CDO creates higher rating tranches out of lower rating collateral
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CDO – IMF Diagram
Source: DTCC, ISDA
Arbitrage CDO
Balance Sheet CDO
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Cash vs. Synthetic CDOs 合成式抵押债务债券 担保债务凭证
Cash CDO uses bonds or loans as collateral
Synthetic CDO uses CDS as collateral
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合成式抵押债务债券 担保债务凭证 Synthetic CDO
A synthetic CDO is a portfolio of credit default swaps (CDS).
The CDS seller provides protection (insurance) in the event of a default or specified "credit event" related to the reference security.
The CDS buyer pays a premium in exchange for this protection.
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合成式抵押债务债券 担保债务凭证 Synthetic CDO
Source: FCIC
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单一管道式抵押债务债券 担保债务凭证Single-tranche CDO (STCDO)
A single-tranche CDO is a contract between protection buyer and protection seller.
A single tranche is commonly referred to as an ―x excess y‖ tranchex is the tranche sizey the subordination level (attachment point)
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单一管道式抵押债务债券 担保债务凭证Single-tranche CDO - Decision Steps
1.Select a portfolio of credits to that they want exposure to.
2.Choose a subordination level (attachment point)and a tranche size corresponding to their risk/return preference or yield target.
3.Dynamically manage their position and substitute credits in the collateral portfolio throughout the life of a single-tranche CDO.
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单一管道式抵押债务债券 担保债务凭证Single-Tranche CDO
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单一管道式抵押债务债券 担保债务凭证 (无本金)Single-Tranche CDO — Unfunded Form
The investor receives a periodic premium usually expressed as a fixed percentage in basis points of the outstanding notional amount of the tranche. The investor provides protection for any loss more than
subordination level, but the loss payment made by investors is capped by the tranche size, i.e., the maximum loss for an investor is the tranche size.
The cash flow exchanged between the two counterparties default swap premium from protection buyer to the
protection sellerloss payment, if any, from the protection seller to the
protection buyer.
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单一管道式抵押债务债券 担保债务凭证 (有本金)Single-Tranche CDO — Funded Form
The notional amount the investor pays on closing is usually invested in high-quality, liquid assets such triple-A rated asset-backed securities. The STCDO note pays fixed rate or LIBOR plus a premium on the outstanding notional.
At maturity, the investor is paid back the notional, unless the losses exceed the subordination level. If that occurs, the notional is reduced, and a portion of the collateral is liquidated and paid to the protection buyer.
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单一管道式抵押债务债券 担保债务凭证Single-Tranche CDO — Example
Issuer CDO Company Cayman Islands Ltd. Nominal $30,000,000 Maturity 5 years Rating A+/A1 Collateral 5yr MTN issued by the International Bank for Reconstruction and Development (World Bank) rated AAA/AaaCoupon 6m Libor + 1.00% Reference Portfolio $1,000,000,000 portfolio of 100 investment grade entities based in USA and Canada Attachment Point 3% Detachment Point 6%
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the tranche has 3% subordination, the reference portfolio has 100 names with $10 million size each, and the recovery rate is 40% for each credit.
5 defaults can happen without affecting the tranche on the portfolio5 * $10 million * (100% – 40%) = $30 million loss on the portfolio
The losses associated with the 6th default will be covered by the protection seller.
单一管道式抵押债务债券 担保债务凭证Single-Tranche CDO — Example
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STCDO vs. Corporate Bonds
Spread pick-up with higher yields than a similarly –rated corporate investmentDiversified, agency-rated credit exposureCustomizable to achieve balance between risk tolerance and pricing goals:Portfolio selectionAmount of Loss ThresholdExposure size
Simple transaction economics (unlike complicated payment waterfalls with cash CDO notes)Easy execution and instant rampupSubstitution rights available (subject to agreed –upon criteria)
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抵押债务债券 担保债务凭证 风险CDO Risks
Systemic or Modeling Risk
Collateral Credit Risk
Structural Risk
Servicer / Manager Risk
Call Risk
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Correlation相关
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Correlation 相关
Increased correlation increases the probability of extreme events.good extremes (i.e. no
defaults)bad extremes (i.e. many
defaults).
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亏损分配与相关Portfolio Loss Distribution vs. Correlation
Higher correlation produces ―fat tails‖ –Increasing the likelihood of extreme outcomes (both no default, and high default scenarios)
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相关与抵押债务债券 担保债务凭证 Correlation and CDO
Default correlation INCREASESprices on Senior Tranches DECREASESprice on Equity Tranche INCREASES
Default correlation DECREASESprices on Senior Tranches INCREASESprice on Equity Tranche DECREASES
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相关与一篮子信用违约交换 Correlation and Basket CDS
Default correlations INCREASESspread on 1st-to-default CDS DECREASESspread on Nth-to-default CDS INCREASES
Default correlations DECREASES spread on 1st-to-default CDS INCREASESspread on Nth-to-default CDS DECREASES
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相关与抵押债务债券担保债务凭证/一篮子信用违约交换Correlation and CDO (Basket CDS)
Higher
SpreadDefault more
likely
Complex(
Varies)
Lower
Spread
Lower
SpreadDefault less
likely
Complex(
Varies)
Higher
Spread
Senior
Tranches
Mezzanine
Equity
Low CorrelationHigh Correlation
CDO
(Basket CDS)
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Constant Proportion Debt Obligation CPDO
固定比例债务债券
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固定比例债务债券First CPDO, SURF 100, 2006/8
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固定比例债务债券 CPDO Structure
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固定比例债务债券 CPDO
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A dynamically leveraged credit trading strategy which aims at generating high coupon payments ( typically 100-200bp above LIBOR rate ) Selling default protection on a portfolio of
investment-grade obligors with low default probabilities.
An investor in a CPDO provides initial capital and receives periodic coupon payments of a contractual spread above the LIBOR rate until expiry of the deal.
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固定比例债务债券 CPDO
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Short term Investment, like a money market account
Leveraged position in a CDS index (typically the 5-year CDS index iTraxx or CDX)
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固定比例债务债券 CPDO
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固定比例债务债券 CPDO
Cash in When the portfolio value reaches a value sufficient to meet future liabilities, then the CPDO manager can meet her obligations by simply investing (part of ) the fund in the money market. In this event all swap contracts are liquidated and the CPDO portfolio consists only of the money market account.
Cash outWhen the value falls below a threshold. In this case the CPDO unwinds all its risky exposures, ends coupon payments and returns the remaining funds to the investor.
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固定比例债务债券交易策略 CPDO strategy
LeverageWhen NAV increases, the leverage decreasesSell High
When NAV decreases, the leverage increasesBuy Low
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固定比例债务债券 CPDO Risks
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Spread riskThe main determinate of the CPDO cash flow is the index
defaults swap spread. The index roll will typically result in a downward jump in the spread since the downgraded names that are removed contribute with higher spreads than the investment grade names that are replaced by. On average this negative jump implies a market-to-market loss on roll dates.
Default riskThe default rate in the underlying portfolio determines the
average number of defaults during the lifetime of the CPDO. A higher default rate is negative for the CPDO performance
due to higher expected credit losses.
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Interest rate riskHigher LIBOR rates imply higher coupon payments to
the investor but this effects will more or less be offset by the higher interest accruing to the money market account.
Present value
Liquidity risk The liquidity of the index. Most CPDOs reference the most
liquid indices, iTraxx and CDX.
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固定比例债务债券 CPDO Risks - Continued
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CPDOs are path-dependent spread derivatives. The main risk of a CPDO is not default risk but spread and
interest rate risks. The worst case scenario for the CPDO investor is observed to be a spread-widening scenario, even in absence of defaults.
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固定比例债务债券 CPDO Risks - Continued
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Constant Proportion Portfolio Insurance CPPI
固定比例投资组合保险债券
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固定比例投资组合保险债券Constant Proportion Portfolio Insurance (CPPI)
A trading strategy which allows an investor to maintain an exposure to the upside potential of a risky asset while provide a capital guarantee against downside risk.
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固定比例投资组合保险债券 CPPI
guarantee the capital investeda position in a Treasury bonds or liquid monetary instrumentsa leveraged position in a "risky asset", usually a market index
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固定比例投资组合保险债券 CPPI
Et = M x ( At- Ft) At = Dt + Et
A (asset) ,
D (Deposit) = reserve assetE (Exposure) = active asset M (Multiplier) F (Bond floor) = minimum guarantee (A - F) = cushion
Bond floorThe bond floor is the value below which the value of the CPPI portfolio should never fall in order to be able to ensure the payment of all future due cash flows (including notional guarantee at maturity).
MultiplierUnlike a regular bond + call strategy which only allocates the remaining dollar amount on top of the bond value
(say the bond to pay 100 is worth 80, the remaining cash value is 20), the CPPI leverages the cash amount. The multiplier is usually 4 or 5, meaning you do not invest 80 in the bond and 20 in the equity, rather m*(100-bond) in the equity and the remainder in the zero coupon bond,.
GapA measure of the proportion of the equity part compared to the cushion : (CPPI-bond floor)/equity. Theoretically, this should equal 1/multiplier and the investor uses periodic rebalancing of the portfolio to attempt to maintain this.
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固定比例投资组合保险债券 CPPI vs. Bond + Call
Bond + Call client would only get the remaining proceeds (or initial cushion) invested in an option, bought once and for all
CPPI provides leverage through a multiplier.
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固定比例投资组合保险债券 CPPI Example
Money invested = $100Bond Floor = $80Risky Asset ↓ 50%Let X = Risky position
X * 50% + (100 – X) = 80100 – 80 = -0.5X + X20 = 0.5XX = 40
Multiplier = 40 / (100 – 80)= 2
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乘数与亏损 Multiplier and Loss
Loss: maximum percentage loss of risky asset before rebalance
Multiplier * (100 – Floor) * (1 – Loss) +
100 – Multiplier * (100 – Floor) = Floor
Multiplier * (100 – Floor) – Multiplier * Loss * (100 – Floor) + 100 – Multiplier * (100 – Floor) = Floor
-Multiplier * Loss * (100 – Floor) + 100 = Floor-Multiplier * Loss * (100 – Floor) = -(100 – Floor)Multiplier * Loss = 1
Multiplier = 1 / Loss
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固定比例投资组合保险债券 CPPI
Leverage When Volatility increases, Leverage (multiplier)
decreases When Volatility decreases, Leverage (multiplier)
increases
Rebalance When NAV increases, cushion increases Buy (due to multiplier) High
When NAV decreases, cushion decreases Sell (due to multiplier) Low
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固定比例投资组合保险债券 部位调整 CPPI Rebalance
Time Discipline
Market Move Discipline
Multiplier Dicipline
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固定比例投资组合保险债券 用户 Usage of CPPI
Closed-end fundOpen-end fundActively managed fundsPassive fundsHedge fundsEthical fundsWith-profit fundPension funds
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固定比例投资组合保险债券与抵押债务债券 担保债务凭证CPPI vs. CPDO
Upside PotentialCPPI lets the profit runCPDO limits the profit when Cash In
Downside ProtectionCPPI guarantees return of capital investedCPDO stops loss when Cash Out
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固定比例投资组合保险债券 跳空风险CPPI Gap Risk
As dynamic trading strategies assume that capital markets trade in a continuous fashion, gap risk is the main concern of CPPI writer, since a sudden drop in the risky underlying trading instrument(s) could reduce the overall CPPI net asset value below the value of the bond floor needed to guarantee the capital at maturity. Such sudden price moves may make it impossible to shift the position from the risky assets to the bond, leading the structure to a state where it is impossible to guarantee principal at maturity. With this feature being ensured by contract with the buyer, the writer has to put up money of his own to cover for the difference (the issuer has effectively written a put option on the structure NAV). Banks generally charge a small 'protection' or 'gap' fee to cover this risk, usually as a function of the notional leveraged exposure.
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Quanto双币别衍生品
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双币别衍生品 Quanto
Quantity adjusting Option
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双币别衍生品 Quanto
A cash-settled, cross-currency derivative in which the underlying asset is denominated in a currency other than the currency in which the quanto is settled.
Quantos are settled at a fixed rate of exchange, providing investors with shelter from exchange-rate risk.
At the time of expiration, the option's value is calculated in the amount of foreign currency and then converted at a fixed rate into the domestic currency.
A quanto has an embedded currency forward with a variable notional amount.
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双币别衍生品 Quanto Example 1
BSE SENSEX (Bombay Stock Exchange Sensitive Index)a free-float market capitalization-weighted stock market
index of 30 well-established and financially sound companies listed on Bombay Stock Exchange (BSE).
Eurex SENSEX Futures (FSEN)USD $1 x SENSEXSettled in US Dollar, Not Indian Rupee
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双币别衍生品 Quanto Example 2
Nikkei 225a stock market index for the Tokyo Stock Exchange
(TSE)It has been calculated daily by the Nihon Keizai Shimbun
(Nikkei) newspaper since 1950.a price-weighted index (the unit is yen), and the
components are reviewed once a year
CME Nikkei 225 Dollar FuturesUSD $5 x Nikkei Stock Average Settled in US Dollar, Not Japanese Yen
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双币别衍生品 Quanto Option
A quanto option is an option on some underlying in one currency but paid in another currency.
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双币别衍生品 Quanto Option Example
A quanto IBM stock option £MAX(S-K,0)S is the IBM stock price at maturityK is the strike.
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Quanto Swap双币别衍生品交换
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双币别衍生品交换 Quanto Swap
Differential swap“diff” swap
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双币别衍生品交换 Quanto Swap
Like Interest Rate Swap
Invest / Speculate in foreign interest rate without currency risk
Only interest payments are exchanged, not principal
Interest payments are based on two reference rates in different currencies
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双币别衍生品交换 Quanto Swap - fixed to floating
One party pays a fixed rate and one pays a floating rate. The fixed and floating rates are in different currencies. Both the fixed and floating rates are paid in the same currency.
Exampleyou are paying a fixed rate on a $1 million liability. You enter into a quanto swap, whereby you receive a
fixed rate from the other party, and pay the other party the 6m EURIBOR floating rate on the USD notional in USD.
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双币别衍生品交换Quanto Swap - floating to floating
Floating to floatingBoth parties pay a floating rate, each taken from a
reference rate based on a different currency, such as LIBOR and EURIBOR. Both floating rates are payable in the same currency.
ExampleYou are paying a 6m USD LIBOR on a $1 million liability. You enter into a differential swap, whereby you receive
the 6m USD LIBOR floating rate from the other party, and you pay the other party the 3m EURIBOR floating rate on the USD notional in USD.
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双币别衍生品交换 Quanto Swap
Quanto Swap ContractReference rates(+ Spread)NotionalDate the contract begins. Duration of the contract. The frequency of the payment periods for the interest rate
payments.
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双币别衍生品交换 Quanto Swap Advantages
It lets you take a view on a foreign reference rate, without exposing yourself to any foreign exchange rate risk.
It lets you transfer liquidity in one currency into another currency.For example, from 6m USD LIBOR to 3m EURIBOR
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