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33 Reviews
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51 of 52 people found the following review helpful
5.0 out of 5 stars Perfect for beginners, excellent reference for veterns
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...
Published on April 14, 2001 by mrfinance

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20 of 24 people found the following review helpful
2.0 out of 5 stars A non-quantitative finance book.
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...
Published on January 4, 2004


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51 of 52 people found the following review helpful
5.0 out of 5 stars Perfect for beginners, excellent reference for veterns, April 14, 2001
This review is from: Credit Derivatives: A Guide to Instruments and Applications (Hardcover)
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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44 of 45 people found the following review helpful
5.0 out of 5 stars Excellent Primer and Reference Resource, November 5, 2001
By 
Pelorus (Wilmette, IL USA) - See all my reviews
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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35 of 35 people found the following review helpful
4.0 out of 5 stars Crisp and humourous explanation of the topic, October 29, 1999
By A Customer
This review is from: Credit Derivatives: A Guide to Instruments and Applications (Hardcover)
The book uses simple examples to explain a relatively new area in derivatives. In this area it scores 5/5, but unfortunately does not score as well in its treatment of the pricing and management of these structures as well as I had hoped.
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36 of 37 people found the following review helpful
5.0 out of 5 stars An Essential Addition for the Credit Derivatives Trader, October 22, 2003
By A Customer
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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36 of 37 people found the following review helpful
4.0 out of 5 stars Careful attention to terminology, September 1, 2003
By A Customer
The title I have just given this review might not seem like high praise. If not, think again. In the world of finance, especially in the subfield of credit derivatives, the fact that different trading communities use different labels for the same trades and features causes no end of trouble and frustration.
Tavakoli wisely devotes a good deal of attention, then, to what names are and should be given to what things.
She begins her discussion of credit default swaps, for example, by discussing the standard terminology. "If the fee is paid up front, which may be the case for very short dated structures, the agreement is likely to be called a credit default option. If the fee is paid over time, the agreement is more likely to be called a swap."
She disagrees with this habit. She would prefer to call a swap only if the parties are actually exchanging the credit default list of two different credits. Otherwise, "cash flows paid over time are nothing more than an amortization of an option premium."
She explains why the usage that over-stresses that amortization came about. Its because the desks at many banks where this work is done are occupied by former interest-rate-swap staff, so the ISDA terminology persists.
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35 of 36 people found the following review helpful
5.0 out of 5 stars Products, Applications, and Pricing Direction, October 4, 2003
By A Customer
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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38 of 40 people found the following review helpful
5.0 out of 5 stars This trader's favorite credit derivatives reference, October 16, 2003
By A Customer
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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31 of 32 people found the following review helpful
4.0 out of 5 stars Easy to understand analysis of credit derivatives, August 23, 1998
This review is from: Credit Derivatives: A Guide to Instruments and Applications (Hardcover)
Many aspects of the basic products explained using charts, elementary mathematics and examples.
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30 of 31 people found the following review helpful
5.0 out of 5 stars Lucid, November 15, 2003
By A Customer
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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34 of 36 people found the following review helpful
5.0 out of 5 stars Credit Derivatives is an Outstanding Book, November 5, 2003
By A Customer
"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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Credit Derivatives: A Guide to Instruments and Applications
Credit Derivatives: A Guide to Instruments and Applications by Janet M. Tavakoli (Hardcover - June 9, 1998)
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