Credit Derivatives: Regulatory, Legal, and Taxation Issues
Overview/Description Target Audience Expected Duration Lesson Objectives Course Number Overview/Description
Credit derivatives are highly complex financial instruments used to transfer credit risk from one entity to another. These instruments are defined as contracts that are traded over-the-counter between private parties. Due to their private nature, the inherent risks posed by such agreements have forced regulators to address legal, accounting, and tax issues related to these agreements. Standardized documentation and definitions have been created to allow for mutual understanding between the two parties and try to remove any vagueness in the contract details that may prove detrimental to either party. Standardization will never be complete for such agreements due to the specific requirements of different users from one contract to another; however, they hope to build on a mutual solid foundation while still allowing flexibility to meet end user requirements. Because proper accounting and taxation treatment of these products is constantly evolving, professional judgment plays a great role in these areas. This course introduces regulatory documentation set out by the International Swaps and Derivatives Association (ISDA) and the legal issues that may arise due to a lack of proper documentation and understanding between two parties. It also examines the issue surrounding the definition of restructuring as a credit event. The course briefly covers regulatory issues, including centralized clearing mechanisms and collateral margins, and the accounting treatment and tax issues regarding credit derivatives.
Financial services professionals, consultants, and sales professionals interested in providing or selling products and services to banks, investment companies, and other financial corporations, and everyone interested in creation and use of credit derivative instruments