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Summary: This trader's favorite credit derivatives reference
Review: It seems the same reviewer felt strongly enough to post two negative reviews, and oddly the previous review echoes the words of a fellow who is coming out with his own book on this subject, so it seems the reviewer is the same person with a self-interested agenda. I believe this fellow works for one of my competitors in London, but seems to want to style himself as being from either London or NY based on reviews he seems to have posted on Tavakoli's other book. I'm sure he hopes his books do as well, so perhaps the one and two star reviews should be taken as a form of twisted homage.I've traded credit derivatives for five years. Tavakoli's book is an authoritative account of this market. I keep it on my trading desk and refer to it. Even though I wish Tavakoli would write a third edition, the product descriptions are comprehensive and classic for today's market and I see this book on every trading floor in Europe. One head of structured credit products also remarked on this and said he sees this book whenever he travels on business in Europe or the U.S. It has become the reference of choice in clarifying language and definitions in the credit derivatives market. The explanations of pricing and data issues suggest common sense approaches for determining value. In addition, the way this book is written prevents a difficult subject from being boring. A trader at a conference I attended recently paraphrased Tavakoli's section on Korean credit protection and correlation, because the point was so well made, and this issue keeps reappearing in various forms in our market. A job well done. The market seems to have voted with me in the sales and longevity of this book.
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Summary: Easy to understand analysis of credit derivatives
Review: Many aspects of the basic products explained using charts, elementary mathematics and examples.
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Summary: Derivatives Sales view:
Review: POSITIVE POINTS: Best indepth book on Credit Derivatives. Very readable. Explains very nicely why this derivatives are so important for banks. Non technical. NEGATIVE POINTS: Focus on banks with only a little chapter on Credit Derivatives as investment products. No explanation how those derivatives are priced (but hey, there are loads of technical books)
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Summary: Same as the earlier edition
Review: Pretty much the only difference between this edition and the last one is the cover. It's too bad, because the first edition was carelessly written (not that it isn't occasionally useful). I don't know, maybe we'd prefer people to have a cursory understanding of the products... easier to do business that way.
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Summary: A non-quantitative finance book.
Review: Several earlier reviews of Janet Tavakoli's book praise it for thoroughly explaining various types of credit derivatives and effectively analyzing such issues as marking-to-market credit derivatives. However, many of these reviews do a disservice to potential book buyers by failing to point out deficiencies that become clear just by superficially browsing through the book: 1. Tavakoli rightly cautions against using neat pricing formulas that make unwarranted assumptions about critical variables like default probabilities, but her book appears to contain virtually no statistical analysis or pricing models of its own, and indeed, very little quantitative analysis at all. 2. In lieu of quantitative analysis, Tavakoli often substitutes assertions too fuzzy to have a testable meaning, such as "The market doesn't reveal its secrets; it responds to a method of questioning." She also has a tendency to fill up space with bromides like "A firm with the ability to manage risk and to exploit timely marketing information and good marketing distribution has the greatest chance of reward." 3. Her book also contains gratuitous and unprofessional asides that have no place in a text on credit derivatives, such as her contentious conversations with other traders, and her explanation of alleged extensive Jewish influence in international banking. She claims that:
"The international Jewish community was instrumental in the formation of early banking practices...The Jewish people had a means of censuring members of their community who broke the law through social and commercial ostracism...the Jewish people had their first international 'sovereign' state visible outside of their community in the form of the first standards for international banking." 4. When she does briefly discuss statistical models, Tavakoli can be imprecise, wordy, and uncertain, as when she talks about the implied volatility of options in the context of using historical data to predict credit risk: "If we want to construct a probability distribution of the terminal value of a security due to interest rate and credit moves, we could canvas the market for a menu of puts and calls in, at, and out of the money for the relevant time horizon. From this we can not only back out implied volatilities, but also..."
Readers who know that the option price is a one-to-one function of volatility (among other variables) in various standard pricing models, will understand what Tavakoli is referring to here, but a phrase like "backing out implied volatilities" is not an adequate explanation of anything. In summary, although Ms. Tavakoli deals with a large number of essential topics, including credit linked notes, exotic swaps, and emerging markets, she does so heuristically, with little quantitative justification, and her book is burdened by too much inappropriate and superfluous material.
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Summary: Perfect for beginners, excellent reference for veterns
Review: Takavoli's book is the prefect credit derivatives resource for novices and finance professionals who work around, but not with the products. Various forms of credit derivatives are explained in for the most part, qualatative narratives complimented with dealflow charts and information grids. The text remains very readable and comprehensible. That is why its perfect for someone who needs to get a basic grasp of the products, but would be intimidated by a heavy quant reading. This book also includes basic documentation for each of the profiled products.
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Summary: Credit Derivatives for the Capital Markets
Review: Tavakoli gives a very clear description of terminology used in the international derivatives marketplace. Jargon doesn't often travel well across borders, so this is especially valuable. It is difficult enough dealing with ISDA language and foreign languages. The peculiarities of high finance add another complicating spin that Tavakoli does an excellent job of clearing up. The coverage of leverage and total return swaps is especially valuable to asset managers and hedge funds. The use of off-balance sheet financing and upfront collateral is especially useful to those new to total return swap trading. Although Tavakoli gives examples of hubris and humor, this is a serious finance book, and although Schonbucher gives more details on the mathematics in his book "Credit Derivatives pricing, this book is not easy. Tavakoli demonstrates a strong command of the topic and great skill in explaining a complex topic without glossing over theory. This is an excellent reference book. Credit default swaps and all of the terminology, both standard and non-standard are thoroughly explained. The graphics are very clear, and there are lots of practical examples with straightforward explanations based on depth of experience and straightforward math. If you are new to finance, this book is not the place to start. If you have a background in bonds or other areas of the capital markets, you can tackle this book. Tavakoli assumes the reader has some experience and draws on this to make credit derivatives a part of the tool kit. You will be able to understand both the theory and real world applications of credit derivatives.
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Summary: State of the Art
Review: Tavakoli has beautifully written a cutting-edge book on how to think about credit derivatives in the context of the global markets. One doesn't need a Ph.D. in math to understand the concepts presented here, because they are competently explained. Tavakoli evidences a deep understanding of the topic in her ability to make complicated mathematical concepts clear, and explaining how to apply credit derivatives in practice. I noticed the reader below couldn't be bothered to actually read this book, but seems to have views on what is and isn't appropriate in a finance book. I happen to be Jewish, and thought the review smacked of anti-Semitism. Tavakoli's remarkable explanation of the development of international banking was particularly appropriate in the explanation of sovereign risk and why it occurs (mismatch of cultures and ethics among other reasons). I believe most professionals will agree there is more to credit risk than equations especially in light of recent developments in the international markets. Tavakoli's ability to integrate multiple business and finance disciplines is one of the reasons I find this book the best product book on the market for credit derivatives.
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Summary: Excellent Primer and Reference Resource
Review: Tavakoli has done an artful job in Credit Derivatives ( 2nd Edition) of simplifying complex subject matter through the use of practical examples, good graphics, and simple declarative sentences supported by math and real world experience. While this book is not intended for pure novices with no background in finance or mathematics, it does meet the purposeful, educated reader halfway. I would highly recommend Credit Derivatives to anyone with a need to understand the theory, mechanics, risks and real world applications of credit derivatives. Tavakoli's skill of explaining a complex topic without dumbing it down makes Credit Derivatives an excellent primer and reference book for understanding and managing the use of credit derivatives. If you need to understand credit derivatives, this is a great book. As a consultant, Tavakoli's book was invaluable in helping me expeditiously get up to speed on this area of financial risk management.
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Summary: Not Nearly as Easy as Advertized
Review: The author (plus various reviewers) touted this book as an accessible primer to derivatives. This prompted me to try it out. After 40 pages I realized this book was actually meant for people with AT LEAST basic degrees in finance. If you don't have a decent finance background, you'd be busy CHEWING gingko biloba at the end of the TRORS chapter. In a nutshell, If you are like me (fresh off books like Beating The Street or Stocks For the Long Run), this is not the next step. Maybe you should get that MBA first.
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