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Collateralized Debt Obligations and Structured Finance : New Developments in Cash and Synthetic Securitization

34 customer reviews
ISBN-13: 978-0471462200
ISBN-10: 0471462209
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Editorial Reviews


“…Tavakoli uses her broad professional experience to examine the CDO market in simple and clear language.” (Risk, March 2004)

"Tavakoli…does what she can to address this market’s growing pains in…this intriguing book" (Hedge World)

From the Inside Flap

What is a collateralized debt obligation (CDO)? What is securitization? What is a synthetic credit structure? What is an asset-backed security? Ask any market professional and they will all agree that these are structured products, but total agreement usually ends there–mainly because, in a global financial environment, one product may have more than one definition.

To help you keep up with the expanding CDO market and the various elements of structured finance, Collateralized Debt Obligations and Structured Finance digs deep to explain some of the newest areas in structured finance, particularly the CDO market and some of the problems created by its rapid growth.

Collateralized Debt Obligations and Structured Finance provides a state-of-the-art look at the exploding CDO and structured credit products market. Financial expert Janet Tavakoli–author of the widely popular Credit Derivatives and Synthetic Structures–examines a variety of securitization topics never before seen in print, including the huge increase in the CDO arbitrage created by synthetics; the tranches most at risk from this new technology; dumping securitizations on bank balance sheets; the abuse of offshore vehicles by companies such as Enron; and securitizations made possible by new securitization techniques and the introduction of the Euro.

This valuable guide comprehensively covers one of the fastest growing markets on Wall Street, predicting where new bank regulations and other developments may lead to product growth or product extinction. While providing an overview of the market and its dynamic growth, Collateralized Debt Obligations and Structured Finance also explores the types of products offered, hedging techniques, and valuation and risk/return issues associated with investing in CDOs and synthetic CDOs.

Written in a clear and accessible style, this book is a valuable resource that will provide you with critical insights into many areas of this important market sector.


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Product Details

  • Series: Wiley Finance (Book 218)
  • Hardcover: 352 pages
  • Publisher: Wiley (August 28, 2003)
  • Language: English
  • ISBN-10: 0471462209
  • ISBN-13: 978-0471462200
  • Product Dimensions: 6.5 x 1.2 x 9.4 inches
  • Shipping Weight: 1.3 pounds
  • Average Customer Review: 4.1 out of 5 stars  See all reviews (34 customer reviews)
  • Amazon Best Sellers Rank: #1,656,159 in Books (See Top 100 in Books)

More About the Author

Janet Tavakoli is the president of Tavakoli Structured Finance, a derivatives risk consulting firm for financial institutions. She was born and raised in Chicago, Illinois. She has worked as a chemical engineer, earned her MBA from the University of Chicago, taught derivatives as an adjunct associate professor of finance, and worked for Wall Street firms in New York and London. She also lived in Iran during the Islamic revolution and has traveled extensively in Europe and Japan.

She is the author of Credit Derivatives & Synthetic Structures, 2nd ed. (Wiley 2001), Structured Finance & Collateralized Debt Obligations, 2nd ed. (Wiley 2008), and Dear Mr. Buffett: What an Investor Learns 1,269 Miles from Wall Street, (Wiley 2009).

The New Robber Barons (Lyons McNamara, 2013), is a compilation of her commentaries since the September 2008 financial crisis.

Archangels: Rise of the Jesuits (Lyons McNamara, 2013) is her fiction debut thriller.

Unveiled Threat: A Personal Experience of Fundamentalist Islam and the Roots of Terrorism (Lyons McNamara, 2014) is a non-fiction thriller and commentary.

Decisions: Life and Death on Wall Street (Lyons McNamara 2015) is her short commentary on Wall Street's culture that puts perceived profit above all else.

Ms. Tavakoli is frequently published and quoted in the Wall Street Journal, Financial Times, New York Times, Business Week, Bloomberg News, and more. She is also a frequent front page writer at the Huffington Post. Frequent television appearances include CBS's 60 Minutes, CNN, C-Span, CNBC, BNN, CBS Evening News, Bloomberg TV, Fox, ABC, and BBC.

Customer Reviews

Most Helpful Customer Reviews

32 of 32 people found the following review helpful By A Customer on December 8, 2003
Format: Hardcover
This is a terrific book for anyone, any level of competency that wants to or needs to now about collateralized debt obligations and structured finance; particularly new developments in cash and synthetic securtizations. The author is so insightful and clever in explaining these complicated financial instruments it is almost beyond words; as well as beautiful and articulate. This book would be an excellent stocking stuffer for any financial risk management professional or as an office gift for any support staff or assistants. This magnum opus is an excellent reference book with solid and consistent definitions, descriptions and real world examples. No doubt this financial treatise by Tavakoli will become the textbook of choice for any graduate school developing a curriculum on financial risk management. If it was possible to give this book ten (10) stars, I would.
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36 of 37 people found the following review helpful By Mike Hunt on December 11, 2003
Format: Hardcover
This book was exactly what I was looking for--- understanding what the heck credit derivatives are and how they are used. As a recently hired executive assistant to a partner in a large investment banking firm, I needed to quickly learn the jargon of the financial risk management business. This book was just fabo! Good graphs. Simple declarative sentences for easy comprehension.
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37 of 39 people found the following review helpful By A Customer on September 22, 2003
Format: Hardcover
I would highly recommend CDOs and Structured Finance to anyone with a need to understand the theory, mechanics, risks and real world applications of CDOs, securitization, and synthetic credit structures (now I finally understand the difference between the three!). Very thorough and comprehensive yet easy-to-understand read on a growing field.
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33 of 35 people found the following review helpful By A Customer on October 30, 2003
Format: Hardcover
I second the review below. Tavakoli's remarks on Turkey in Chapter 10 of "Collateralized Debt Obligations and Structured Finance" are prescient. Reinsurance companies, European banks, and rating agencies all denied there were serious potential problems even when Tavakoli's remarks about ratings were brought up at one of our securitization deal meetings last month.
Turkey just announced the world's biggest bank fraud. It appears Imar bank, run by members of the Uzan family, has a $6 billion gaping black hole. Initially, Turkey thought it was only $500 thousand, but now puts the deficit at more than $6 billion. The Uzan's were fined $4 billion by a US court in July in the alleged fraud against Motorola's mobile phone division. The $4 billion appears as unrecoverable as Imar bank's deposits. Apparently Cem Uzan's contributions to Prince Charles's charities and hobnobbing with royalty have no influence in US courts.
Not only does it appear Imar Bank sold non-existing treasury bonds to clients, it appears more than 20 people destroyed bank records that indicated they illegally embezzled funds. Deals linked to a bank like this may have no protection from documentation that was altered due to fraud or destroyed. Tavakoli pointed out the rating agencies didn't fully capture this risk, especially in future flows deals that relied on the integrity of documentation and proper instructions to offshore banks. The worst case scenario she mentions as a caveat has become a grim reality.
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38 of 41 people found the following review helpful By A Customer on October 8, 2003
Format: Hardcover
This book combines expertise and readability in the style of Tavakoli's "Credit Derivatives". I would expect it to become a classic in this market as is her other book in the credit derivatives market. This book has particularly nice coverage on SPEs. Her explanation of the evolution of CDOs from balance sheet deals to arbitrage deals includes lots of practical examples and clear graphics.
Tavakoli's insights are especially valuable when highlighting caveats introduced by the rapid growth of credit derivatives technology in structured finance. She recommends structural approaches to getting fair value for both structurers and investors. Much of the information on synthetics is new material, and losses that are just now being realized in the market place might have been avoided had this book been available six months ago.
Tavakoli also predicts products that will wane and the products that will experience a growth spurt - such as the secured trust -in the Basel 2 environment.
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42 of 46 people found the following review helpful By A Customer on October 16, 2003
Format: Hardcover
I noticed the same reviewer seems to have posted multiple negative reviews for this book and Tavakoli's credit derivatives book. One of the reviews echoes the words of a fellow who is coming out with his own books on these subjects, so there may be a motive of self-interest. In that respect the one and two star reviews may be a form of envious homage.
I'm a 5-year veteran in credit derivatives trading. I hedge synthetic collateralized debt obligations (CDOs) and manage the risk for single tranche CDOs. I was very glad to receive this book and like it as much as Tavakoli's book on credit derivatives. Tavakoli clearly defines terms. She then clearly explains the products. There are many aspects of the structuring I wasn't aware of that are explained as an entertaining read in this book. Our structuring group liked this book as much as I did, and bought copies for everyone on the desk, and bought copies for customers.
I work for one of the well managed banks that has been providing good value for customers, but I was happy to see Tavakoli talk about how customers have often been ripped-off and she suggests how customers can avoid this - for instance by dealing with my bank. I liked the way the various structures are explained from the bottom up. Tavakoli makes it seem easy to understand the various complex components and the structural options.
The section on language and gaming is especially important. The debate on deal managers both for and against, and the inconsistency of the rating agencies both internally and externally is clearly explained. That isn't necessarily a bad thing, since we want rating agencies to take independent views, but it is important to realize that discrepancies in the approach to rating structured products exist.
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