Customer Reviews

The Definitive Guide to CDOs

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This book is a very easy read on the complex topic of CDOs. In section 1, the market and application of CDOs is introduced in straight forward terms. Section 2 on Basic Properties of CDO Valuation is quite mathematical and only for quantitatively skilled readers. Section 3 `CDO Valuation Approaches' is excellent. The one factor Gaussian copula model is explained very clearly. The VBA model on base correlation is very intuitive! Chapter 16 on `CDO Valuation: A Look at Fact and Fiction' is critical and addresses CDOs in the light of the current crisis. Section 4 on hedging CDOs deals with aspects that risk managers should have considered earlier. Section 5 and 6 are easy reads on regulatory issues and give an outlook. The editor concludes that CDOs will have a comeback after the crisis. Let's hope he is right!

I like this book. In the beginning, straight forward questions as "What is a CDO?" and "Why CDOs?" are asked and answered. Very nice are chapters 1 and 2 on Market and Application of CDOs. Risk Management issues are covered a bit slim with only 2 chapters. Critical issues regarding CDO valuation and hedging are addressed throughout the book, especially in chapters 8 and 16. Altogether, it seems that the editor put a lot of work into the book. The different topics are well introduced and linked, so that the book does not suffer from the typical random `multi-author syndrome'.