Valuation of Interest Rate Swaps and Swaptions

Rating:
Summary: Not worth spending money
Review: Like all other Fabozzi books this one also just scratches the surface of the topic (swap and swaptions) with text book style examples which are not seen in real world. He starts with an example where both the fixed and floating leg of a swap is semiannual and actual/360 which is not the case of US Swaps and nowhere through out the book he discusses how to deal with different day counts (30/360 & actual/360) in the fixed and floating legs as well as different payment styles (semianually for fixed and quarterly for floating). Anyone who is trying to build a swap valuation tool will realize the importance of the above meniotned topics which is not covered in this book. Even a slight change in numbers can change the P&L by several hundred thousand dollars as the notional are generally upwards of 100 million. This book may be good for an undergrad student who is taking the first course in finance and trying to understand what a swap is. But even then it will facilitate only an abstract theoretical knowledge which he/she will never be able to relate to in real world swaps. Avoid this book, it's a waste of your hard earned money.

Rating:
Summary: Educational use only
Review: The book is terrific for a classroom setting. It is far easier to understand the interactions between valuation inputs (term structure, volatility, level of rates, etc) than any other book in the market. The use of the lattice approach is great - and very original. Most students find the lattice approach more easy to understand and therefore more able to better understand these instruments. The book is not designed for a swap dealer by any stretch of the imagination. I have used it in a training program several times with great effect.