Credit Derivatives: A Guide to Instruments and Applications - Hardcover

Tavakoli, Janet M.

Hardcover

ISBN 10: 0471246565 ISBN 13: 9780471246565

Publisher: Wiley, 1998

Synopsis

A comprehensive first look at one of today's fastest growing investment and risk management mechanisms.

"If you want to know more about credit derivatives-and these days an increasing number of people do-then you should read this book." -Merton H. Miller, winner, Nobel Prize in Economics, 1990 Robert R. McCormick Distinguished Service Professor Emeritus, University of Chicago Graduate School of Business.

"Tavakoli brings extraordinary insight and clarity to this fascinating financial evolution. She combines her extensive experience and deep understanding of the derivatives markets with a lucid writing style that makes this an eminently readable volume. This book should set the standard for credit derivatives texts for years to come." -Carl V. Schuman, Manager, Credit Derivatives, WestLB New York.

"Tavakoli does a remarkable job compiling a highly readable and much needed guide to instruments and applications of credit derivatives. Using charts, examples, basic investment theory, and elementary mathematics, Tavakoli explains the real-world practice and applications of credit derivative products. Credit Derivatives clarifies often misunderstood concepts and offers a framework with which to analyze derivatives and how to make them work." -Stephen Wade, Managing Director, UBS Securities LLC Hei Wai Chan, PhD, Director, UBS Securities LLC.

"Tavakoli has written a book that finally demystifies credit derivatives. It is an easy to understand analysis of the many aspects of the basic products used in this new and innovative derivative structure. Anyone in the banking community as well as the sophisticated derivatives professional will find it both useful and insightful." -Randy Allison Kaufman, Managing Director, BankBoston, Structured Derivatives.

One of today's fastest growing investment and risk management mechanisms, credit derivatives are revolutionizing the financial industry and changing the way banks, institutional investors, and securities traders do business both domestically and globally. While potentially beneficial, these important instruments are complex structures that are often misunderstood and frequently mishandled. Written by credit derivatives specialist Janet Tavakoli, this groundbreaking book-the only comprehensive resource of its kind-demystifies and clarifies all the fine points of credit derivatives, offering complete details on what they are, how they work, and how best to capitalize on them.

Though not new, credit derivatives have just recently grabbed the spotlight as vehicles that can diversify portfolio credit risk by dampening the volatility of possible returns. While many investors and end users are beginning to realize the potential of these products, most have only scratched the surface of understanding how they can be applied to credit line and portfolio management, arbitrage opportunities, and the creation of synthetic assets.

Covering these and other current applications, Credit Derivatives provides the foundation necessary to fully grasp and effectively implement these powerful tools. Along with descriptions of the full range of products available in today's marketplace, it explains the economic value of credit derivatives, examines valuation techniques, and, perhaps, most importantly, provides specific guidelines on using them to manage and control risk. Tavakoli demonstrates how credit derivatives have become instruments that enable investors to question, theorize, and create a new framework for evaluating market credit risk.

This accessible and exhaustive guide is must reading for anyone involved in the rapidly growing area of credit derivatives.

About this title

About the Author

JANET M. TAVAKOLI is Product Development Specialist for the Global Risk Management Department at The First National Bank of Chicago. Previously, she was a vice president at the Chicago branch of Bank of America, where she was responsible for the company's marketing of global derivatives and managed its CreditMetrics initiative. She has held similar positions at Mitsubishi Securities, Merrill Lynch, and PaineWebber.

From the Inside Flap

One of today's fastest growing investment and risk management mechanisms, credit derivatives are revolutionizing the financial industry and changing the way banks, institutional investors, and securities traders do business both domestically and globally. While potentially beneficial, these important instruments are complex structures that are often misunderstood and frequently mishandled. Written by credit derivatives specialist Janet Tavakoli, this groundbreaking book-the only comprehensive resource of its kind-demystifies and clarifies all the fine points of credit derivatives, offering complete details on what they are, how they work, and how best to capitalize on them. Though not new, credit derivatives have just recently grabbed the spotlight as vehicles that can diversify portfolio credit risk by dampening the volatility of possible returns. While many investors and end users are beginning to realize the potential of these products, most have only scratched the surface of understanding how they can be applied to credit line and portfolio management, arbitrage opportunities, and the creation of synthetic assets. Covering these and other current applications, Credit Derivatives provides the foundation necessary to fully grasp and effectively implement these powerful tools. Along with descriptions of the full range of products available in today's marketplace, it explains the economic value of credit derivatives, examines valuation techniques, and, perhaps, most importantly, provides specific guidelines on using them to manage and control risk. Tavakoli demonstrates how credit derivatives have become instruments thatenable investors to question, theorize, and create a new framework for evaluating market credit risk. Filled with helpful charts, tables, and graphs, as well as numerous real-world examples, Credit Derivatives offers a complete overview that includes essential information on:
* Total Rate of Return Swaps (TRORS)-receiver and payer motivation, mismatched maturities, balance sheet management, loan TRORS mechanics
* Credit default swaps and options-basis risk, materiality, price adjustments, termination payments, normalized price method, pricing and applications
* Exotic structures-asset swap switches, synthetic lending facilities, basket default options, prorata default structures
* Credit Linked Notes (CLNs)-reasons for CLNs, black box structures, collateralized loan obligations, hybrid securitizations
* Sovereign risk and emerging markets-tax arbitrage, cross border issues, special event risks, pricing convertibility protection
This accessible and exhaustive guide is must reading for anyone involved in the rapidly growing area of credit derivatives.

Edition details

• Publisher: Wiley
• Publication date: 1998
• Language: English
• ISBN 10: 0471246565
• ISBN 13: 9780471246565
• Binding: Hardcover
• Edition number: 1
• Number of pages: 272