CDOs CDS Course & Introduction: Collateralized Debt Obligations & Credit Default Swaps

In this article, we will talk about the Collateralized Debt Obligations & Credit Default Swaps CDS CDO Course & Introduction and topics to be covered in the Collateralized Debt Obligations & Credit Default Swaps CDS CDO. The following topics will give a brief overview of Collateralized Debt Obligations & Credit Default Swaps CDS CDO.
Let's start with the basics for the Collateralized Debt Obligations & Credit Default Swaps CDS CDO:
Introduction to CDO or Collateralized Debt Obligations :

  - CDO how do they work - an example of CDO as a limited life bank
  - Working Economic Principles of CDOs
  - How CDO's evolve from asset backed securities

Structure of a CDO or Collateralized Debt Obligations :

  - CDO as SPV or Special Purpose Vehicle
  - CDO as Collateral manager
  - CDO as Collateral (asset) portfolio
  - CDO as Source of cash flows
  - Tranches while configuring the CDO
  - Life Cycle of a CDO

Arbitrage CDOs or Collateralized Debt Obligations: Here we cover the trading as well as arbitrage opportunities available within the CDO's.

  - How Arbitrage works for the CDO for Cash Flow Transactions
  - Fundamentals of CDO cash flow transactions
  - Cash flow waterfall mechanism
  - Market Value Transactions of the CDOs
  - Comparison with cash flow transactions

Balance Sheet CDOs or Collateralized Debt Obligations:

  - An Introduction to Balance Sheet CDOs
  - Common features to arbitrage CDOs
  - Institutional sponsors and their roles in the CDO market
  - Structure of Balance Sheet CDOs

Introduction to CDS or Credit Default Swaps :

  - Fundamentals of CDS or credit default swaps
  - The difference between interest rate IR swaps and the TR total return swaps
  - Allowing room for the the credit risk

Introduction to the Credit Swap Contracts :

  - Contract terms of Credit Swap Contracts - notional, tenor, reference credit(s)
  - Comparison between Single credit swaps and the basket default swaps
  - The mechanism of timely payments requirments by buyer of credit protection
  - Cash settlement vis-a-vis the Physical delivery
  - Black Swans or Extreme Events - bankruptcy, rating down grade, failure to pay, etc.
  - Nth to default baskets

Uses of Credit Swaps:

  - Buy Side: Minimizing credit exposure
  - Sell Side: Increasing exposure to markets/asset classes
  - Shorting underlying credit (seller not long underlying)

Synthetic CDOs: Beyond the plain vanilla CDO's:

  - Synthetic CDOs Introduction
  - Evolved from balance sheet CDOs in European market
  - Distinguishing characteristic - exposure to risky asset through CDS

Fundamentals of Synthetic CDOs:

  - Structure of synthetic CDOs
  - Low risk collateral assets (funded structure)
  - Credit default swaps
  - Reference assets
  - Comparison to cash CDOs
  - Funded versus unfunded CDOs