Structured Products and Credit Derivatives
Free CAIA Level I lesson in Private Credit. 45 min read, ~6,726 words.
Tranching splits a collateral pool into senior, mezzanine, and equity pieces; losses hit equity first, senior last. Structured products move markets toward completeness by creating payoffs in "states of the world" where investors most need them. CMOs redistribute prepayment risk across seven tranche types (sequential-pay, PAC, TAC, PO, IO, floating-rate...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- strategies
- credit risk bankruptcy
- bonds loans
- direct lending
- mezzanine
- advanced mezzanine
- venture debt
- distressed debt
- asset based lending
- abs risks
- abs
- mortgage overview
- residential mortgages
- mortgage reit returns
- cat bonds
- cat trigger types
- cat valuation
- longevity mortality
- life settlements
- viatical
- structuring overview
- cmos
- cdo intro
- cdo variations
- balance sheet arbitrage cdo
- arbitrage cdo mechanics
- cash flow vs market value cdo
- other cdos
- cdo risks
- credit enhancements
- credit deriv markets
- cds
- cds index
- other credit derivs
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