Rating: 
Summary: Credit Derivatives is an Outstanding Book
Review: "Credit Derivatives" is outstanding. It combines a well-researched work with a readable and interesting style. While most books only describe products in the abstract, this book shows how they are applied from structuring to trading to applications. I'm a portfolio manager for a medium tier bank, and find the analysis of the problems with marking-to-market credit derivatives particularly useful. The portfolio we are hedging is not marked-to-market, but the credit derivatives we use to hedge the portfolio often have slightly different terms and maturities. Under SFAS 133, we have to mark our credit derivatives to market, and they are in our trading book, but managed by our departement. We have to manage the credit derivatives book to dampen volatility in our P&L while maintaining the hedge value to our overall portfolio. We are just beginning in this area, so Tavakoli's book explaining the art as well as the science of credit derivatives has been invaluable. I agree with the reviewer who talked about terminology. Tavakoli does a great job explaining global terminology, and provides a first-rate overview of the global field.
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Summary: Thorough Overview
Review: All the basic products explained. Has explanations of indexes and how they are used in structured notes and trades, but not the new CD indexes developed in the past year.
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Summary: Quite good for a beginner
Review: Clear and informative! Pricing is not of great interest to the author. Hence, the book will serve a trader well. FIRST EDITION IS BETTER.
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Summary: Lucid
Review: Clear explanation of credit derivatives products, but also get a copy of the most current 2003 ISDA language, since this was published in 2001.
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Summary: Products, Applications, and Pricing Direction
Review: Credit derivatives are a very hot topic with the growth rate surpassing all expectations. Some estimates are at more than $3 trillion for 2003, a 50% increase over 2002, and the pace continues. This is the only book on the market that clearly explains the various types of credit derivatives products. This book is also an entertaining read which is unusual for serious finance books. It is rightly noted that this is not for raw beginners, but for people with some finance experience or education.
Tavakoli covers structured financings such as total return swaps, which are used for leverage by hedge funds. All of the various types of credit derivatives and their uses and abuses are thoroughly explained. This book also covers off-shore vehicles, currency convertibility, CDO equity, principal protected notes, credit-linked notes, and much more. She also points out the challenge the lack of data - for instance, correlation data - poses to any pricing model. The ISDA language section could use updating, but as the author points out early on, you have to understand the language, regulatory, and accounting issues and why the issues are important and get the updates, since these things are always in a state of flux. She does an excellent job of explaining the issues and provides guideposts for future learning.
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Summary: An Essential Addition for the Credit Derivatives Trader
Review: Credit derivatives traders and traders of related asset classes such as bonds or asset swaps who want to move into credit derivatives should get this book. Tavakoli starts with an overview of the markets and then examines specific instruments such as total return swaps, credit default swaps, and options, exotic structures and credit linked notes. Synthetic CDOs are also introduced as is are all-important comments on synthetic equity. Credit arbitrage funds also have a section. Documentation, booking and legal issues are explained in an entire chapter devoted to this topic. Tavakoli covers documentation asymmetry, which occurs when two counterparties agree on price, but not on particular points of language in the documentation which leads to basis risk. Anyone trading these products is aware of the potential pitfalls, and these sections alone would make this book an essential read. The book provides only an overview of the various pricing approaches, but discusses the key issues, which revolve around data quality. Particularly irksome are correlation data, default probability data, and data on recovery rates. Traders, marketers, investors, and risk managers who are very quantitative will find this text useful, since it provides a practical guide to pricing in this market. As the author says: "The spread is where the spread is because that's where the market says it is." In this fast growing and evolving market, this is a pragmatic and theoretically sound approach to the market. This book is an essential addition to the finance library of anyone trading or wanting to learn more about credit derivatives.
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Summary: A bit overrated?
Review: Don't get me wrong, this book is pretty good, but the ratio of useful things learned per amount of text read is much less than what I would expect from such a "critically acclaimed" work. I find it somewhat suspicious that most fixed income books on amazon have a review that recommends this book.
Also, as the previous reviewer said, this is not for beginners or for those with only a marginal interest in the area of credit derivatives.
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Summary: Credit Derivatives Come Alive
Review: I especially liked the clear explanation of total return swaps. One mark of knowing a topic well is the ability to make it lively in plain English and raise thought provoking points. One graph on risk versus rewards is classic CAPM, but makes the point with elegant simplicity while integrating knowledge across markets. It's a fascinating read and, unusual in a book about such complex topics, an entertaining read as well. Favorite quote: "Credit derivatives are a tool to help move the DMZ farther into risky territory without taking more casualties. Specifically, credit derivatives can help diversify the credit risk of a portfolio to dampen the volatility of potential returns".
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Summary: Recommended Credit Derivatives Reading
Review: I was looking at the wilmott.com book forum and noticed Tavakoli has a new book out. I bought this one after reading a recommendation for "Credit Derivatives" on the Wilmott book forum this summer and liked it. I thought I'd mention that she isn't the "Queen of RAVs" from Frank Partnoy's book, F.I.A.S.C.O. as one of the reviewers here believed. This is debunked on Paul Wilmott's forum by one of the RAVs associates. I was surprised to see the reviewer below bashed both this book and Tavakoli's new book on CDOs. I agree with the CDO reviewer from Chicago that this seems like someone with a grudge. Anyway, I just bought the CDO book and will read it next. I recommend "Credit Derivatives". As a quant and derivatives specialist I found it very good for the product explanations. I also recommend Schonbucher's "Credit Derivatives Pricing Models".
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Summary: queen of the RAVS
Review: If Janet Tavakoli is not Frank Partnoy's 'Queen of the RAVs' in F.I.A.S.C.O., then I'm a back-office drone. -Kevin Rosema, Rutgers U/JPM
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