Customer Reviews

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

5 star:		(26)
4 star:		(0)
3 star:		(1)
2 star:		(5)
1 star:		(3)

 

 

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.

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.

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.

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.

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.

This deserves more than 5 stars. As a finance professional with almost ten years of experience, I was both educated and entertained. I especially enjoyed Tavakoli's explanations of abuse in a variety of structured finance deals both past and present. She also maintains that Sarbanes-Oxley is no deterrent as long as corporations and not individuals feel the brunt of the consequences.

I finally understand Enron's abuse of offshore vehicles, the involvement of investment banks, and insurance companies (sureties). Tavakoli even explains motives and why finance professionals went along with it: profits, politics, and pluralistic ignorance. She makes the case that the players were well aware of what they were doing. She uses game theory to describe the moves the players made against each other when they tried to recover losses - or avoid making payments against claims - after Enron went bankrupt.

Tavakoli explains why banks have left themselves open to dangerously high concentrated credit exposures, fraud, and structured finance gaming. She explains how false social evidence, lack of due diligence, and lack of sufficient reserves further contributed to the problem.

She recommends viewing ratings on structured finance products with skepticism, especially where documentation risk and cash flow diversion are involved. I was astonished to learn that products are being sold as AAA rated product, when it really is more like a AA rated product, or even worse.

The explanation of synthetic securitizations using credit derivatives is the best I've ever read. Tavakoli thoroughly discusses the language risks, cash flow risks, and rating risks. She compares a cash CDO with a 5-year maturity synthetic CDO. This is the first time I fully understood how these deals work. I was surprised to learn that there is no standard definition of a super senior tranche, and no one - not rating agencies, regulators, or bank managers - has challenged this.

In summary, this book is even better than "Credit Derivatives" by the same author, and that book was a very good book. This book belongs on the bookshelves of investors, structurers, regulators, and managers.

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. Tavakoli did an excellent job of explaining this so that there are no misunderstandings.

I also enjoyed the account of non-CDO structured finance products, since I may gravitate to the structuring side of the business in future.

This one definitely deserves a five-star review. Writing a finance book about such sensitive issues could be compared to being a politician, will never please everyone. Some will support you some will not, some will love you some will not. Tavakoli did a great job writing a book in a subject that is still new and unknown for quite a few financial professionals around the globe, and she did it in a way that is easy and fun to read without sacrificing technicalities. She did an excellent job at describing the structured products, and giving us real life experiences including names and interesting details. A mandatory reading for all those interested in the field.

To anyone who has lived through recent wave of credit downgrades and CDO tranche downgrades, Tavakoli's book gives one plenty to think about. I've had my own share of "fat-tail" events over the past twelve years while I evolved from bond trader to fixed income fund manager. The structural suggestions in this book give sound perspective on how to proceed in this market.

Practitioners with rigorous experience in the markets will find value in the unconventional candor presented in this book. Tranche holders will readily agree that some CDO tranches suffered not just because of credit problems but also because interest rate and currency hedges performed poorly.

The Turkey analysis is a bit spooky. The double-entendre is intentional. Tavakoli doesn't give many clues in the bibliography, but the comments on banks and her read on the instability make me feel that one paranoid reviewer is wasting time on the wrong conspiracy theory. She singles out Turkey - when everyone was telling me it was a buy last summer - and even admits to picking on them as a potentially unstable situation.

We're stuck. Maybe it is different in the United States, but we can't get data on our CMBS and whole business ABS deals. The MBS data services are mainly United States based and there is no data for Europe. When this author says that you are in trouble if you don't know what is happening with the deal cash flows, believe it. If you are looking for liquidity or transparency, you won't find it in this market, but that wasn't what the arranger told us when we bought in. We tried to sell a tranche recently, and we were told there was "no bid" because there wasn't enough pool data to price the deal. If we insisted, I'm sure we could have gotten a ridiculous bid, but we decided to hold. The trustee didn't have current data from the issuers of the underlying ABS, and what information they did have was several months old.