Customer Reviews

Structured Products Volume 1: Exotic Options; Interest Rates and Currency (The Das Swaps and Financial Derivatives Library) (Wiley Finance)

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Structured products, especially those involving fixed income securities and mortgage loans, have been much discussed in the press in recent months, due possibly to the "subprime crisis" and its instigation of large losses accrued by many of the world's top financial institutions. A flurry of articles have appeared in some of the major financial publications that have as their topic the excoriation of structured finance and the credit risk modeling that goes along with them. Those involved in the financial engineering of these products or those aspiring to the profession, as well as those who are not financial professionals, may be taken aback by the content of these articles. What is needed then is a sound overview of the nature of structured products, if only to set the record straight on their risks and the culpability of those who manage them.

This volume, the second of a four-volume set on financial engineering, is a sizable one but can be approached by anyone needing information on structured products. The approach that the author takes is more descriptive, and so no advanced mathematics is needed to read the book. It can also be obtained separately from the other volumes for those who only need information on structured products and credit derivatives. The purpose of the entire set of course is to give a solid foundation for the instruments typically found in financial engineering, and as such is written as a research monograph or encyclopedia. Financial professionals will no doubt view it as such while students and those curious about the subject matter may find it approachable due to its length.

Each article in this volume should not be viewed as independent from the others, and newcomers to the subject matter should be aware of this before reading a particular article. Some prior exposure to the theory behind structured products will be needed before the contents can be appreciated. This reviewer only read the chapter on credit linked notes and collateralized debt obligations and is judging the volume solely on this basis.

As such this chapter gave a good overview of the reasons why these particular products arose and the financial strategies that lie behind them. Again, the financial press has devoted a lot of space to discussing these products recently, especially collateralized debt obligations since they are felt to play a major role in the "subprime crisis." Whether this is true remains to be seen, and only an in-depth, very involved statistical study can settle this for sure, but the information in this chapter will be helpful for those who need to assess or begin such a study.