Lehman Brothers - Credit Derivatives Explained. Enjoy.

TABLE OF CONTENTS
1 Introduction 3

2 The Market 6

3 Credit Risk Framework 11

4 Single-Name Credit Derivatives 17
4.1 Floating Rate Notes 17
4.2 Asset Swaps 19
4.3 Default Swaps 25
4.4 Credit Linked Notes 34
4.5 Repackaging Vehicles 35
4.6 Principal Protected Structures 37
4.7 Credit Spread Options 39
4.8 Bond Options 41
4.9 Total Return Swaps 42

5 Multi-Name Credit Derivatives 45
5.1 Index Swaps 45
5.2 Basket Default Swaps 46
5.3 Understanding Portfolio Trades 50
5.4 Portfolio Default Swaps 53
5.5 Collateralized Debt Obligations 54
5.6 Arbitrage CDOs 57
5.7 Cash Flow CLOs 57
5.8 Synthetic CLOs 58

6 Legal, Regulatory, and Accounting Issues 61
6.1 Legal Documentation 61
6.2 Bank Regulatory Capital Treatment 66
6.3 Accounting for Derivatives 73

7 Glossary of Terms 77

8 Appendix 80

9 Bilbliography 83