Customer Reviews

Understanding Credit Derivatives and Related Instruments (Academic Press Advanced Finance)

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I am a financial engineering graduate student with professional experience in corporate and structured finance. I first read this book before I knew anything about the subject and found it very accessible. This is not a technical introduction to credit derivatives, nor will it be particularly useful to quants (other than perhaps as a quick reference to a couple concepts), however this book does an admirable job of explaining and linking the world of CD practice with academic theory. For anyone who doesn't have a derivatives background, but is able to understand mid-level mathematical concepts, this book is very good. It is clear, concise and is a great place to start for an introduction to CD that is not overly pedantic and offers motivation for further inquiry into the area.

If you are looking for a more technical and comprehensive book on credit modeling (which forms the basis of most CD valuation) then I recommend Jeff Bohn's "Active Credit Portfolio Management in Practice" which has in depth discussions about many of the issues in Bonfim's book as well as much more.

Nonetheless, having read and purchased many books on CD this one is one of the best due to its brevity, concision and practical robustness.

A very good introduction to credit derivatives at the level of
"J.C.Hull - Options, Futures...", as remarked by a reviewer.

This book is also at the level of, but better than the recent text
"Credit Derivatives - A primer on credit risk..." by Chacko et al.


The chapters are short (less than 10 pages mostly),
well organized, clear, gives a good overview, just enough mathematics
and simple numerical examples to fix ideas.

1. Part 1 is chapter 1 to 3, introducing credit derivative (CD) market
and uses of CD.

2. Part 2 is chapter 4 to 14, each describing a type of CD.
Each chapter describing that CD is organized as

a. How does it work ?
b. Common uses.
c. Valuation
d. Variations of the basic structure

3. Part 3 is chapter 15 to 18, describing basic elements of credit risk
modeling like valuing defaultable bonds, CDS premium to hazard rates,
structural/reduced form modeling etc.

4. Part 4 is chapter 19 to 23, addressing valuations of portfolio credit
risk (baskets default swaps, portfolio swaps, CDO's ..)

5. Part 5 is chapter 24 & 25 giving CD documentation/regulatory issues.

This book is very well thought and written. For a beginner in the credit market this book is an excellent approach. Its a grt read and I am truely satisfied.

This book provides an outstanding overview of credit derivatives. Additionally, Antulio Bomfim is able to convey information about a complex product in a manner that is easily understood by the reader.