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Derivative Credit Risk - Analysis and Management
Attending the course will help you:
  • Understand the principles of how to calculate, assess and manage derivative credit risk
  • Learn about interest rate swaps and options
  • Cover techniques for measuring derivative credit risk

Course background

A financial institution deals in many products with many counterparties.  As the Lehman bankruptcy showed, monitoring and managing counterparty credit risk is essential to the survival of a firm.  Today derivatives trading can often create larger exposures for large financial institutions than cash instruments, given the relative volumes being traded.

Who should attend?

This course is recommended for anyone responsible for managing or overseeing derivatives products and counterparty risk.  It is equally valuable to the buy side, sell side or any other participant active in these products.  The programme is suitable for anyone with an understanding of the fundamental concepts of finance, fixed income and an understanding of the basic derivative products.

Course Tutor

Neil Schofield

Neil is a visiting fellow at the University of Reading and is a freelance training consultant. From 2001 to 2008, he was global head of financial markets training at Barclays Capital in London. He was responsible for the design and delivery of a large number of seminars in a variety of different asset classes to many different audiences.  Previous to that he was a director at Chisholm Roth training in London and has also held positions at Chase Manhattan Bank as well as Security Pacific Hoare Govett (now trading as Bank of America). Neil has over 20 years of experience in financial markets. In 2008, he published his first book “Commodity Derivatives” and his second text “Trading the Fixed Income, Inflation and Credit Markets” was published in 2011. He is currently co-authoring a book on Inflation and a book on Equity Derivatives due to be published in 2016.

Course Outline

Session 1: Techniques for measuring derivative credit risk
  • The Sutton formula
  • Replacement cost
  • Mark to market plus add on
  • Semi-analytical methods
  • Monte Carlo simulation

Sessions 2 & 3: Interest rate swaps
  • Valuation
    • Zero coupon swap pricing
    • Selecting the appropriate discount rate (LIBOR vs. OIS)
  • Risk drivers
    • Factors influencing swap spreads
    • Interpreting negative swap spreads
  • Credit risk
    • Deriving the PFE for interest rate swaps
    • PFE for swap variations (e.g. forward starting swaps, amortising swaps, accreting swaps)

Sessions 4 & 5: Interest rate options - valuation
  • Principles of interest rate option pricing
  • Factors influencing interest rate option premia
  • Option risk management – the Greeks (i.e. Delta, gamma, vega, theta)

Session 6: Interest rate options - Risk drivers
  • Characterising yield curve behaviour
    • Principal Component Analysis
    • Theories of the yield curve
  • The relationship between volatility and the yield curve

Session 7: Interest rate options - credit risk
  • Deriving the PFE for interest rate options
    • Caps and floors
    • Swaptions (cash vs. physical settlement)
  • Cancellable vs. extendible structures

Session 8: Managing derivative credit risk - documentation and mitigating strategies     

  • ISDA documentation
    • Credit support annex
  • Credit risk mitigation techniques
  • Credit value adjustment (CVA)
  • Bilateral counterparty risk
    • (BCVA)
  • Examples of 'wrong way' trades

ICE EducationDetails of the next seminar


ICE Education
5th Floor Milton Gate
60 Chiswell Street
London EC1Y 4SA
United Kingdom

Please email education@icmagroup.org to register your interest to attend our next publicly scheduled course.

Based at ICE Education London offices: IntercontinentalExchange® (NYSE: ICE), is a leading operator of regulated global futures exchanges, clearing houses and over-the-counter (OTC) markets.


£1,400 for members and £1,850 for non-members

Course materials will be provided to candidates in electronic format prior to the start of programme. Please ensure that you have access to this document during the course by either printing off a copy or by downloading it on your laptop, iPad or Tablet.

Should you require a hard copy of the course materials, there is a charge for printing off and sending the course materials to the training venue. Please contact education@icmagroup.org a minimum of two weeks before the course start date for further details on this.

Payment can be made by secure online credit card or by invoice. 

Terms and conditions

Please click here to view our terms and conditions before registering.


Should you have any queries, please contact education@icmagroup.org

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