Dec 26 2008
Structured Finance and Collateralized Debt Obligations New Developments in Cash and Synthetic Securitization Wiley Finance
An up-to-date look at the exploding CDO and structured credit products market
In this fully updated Second Edition, financial expert Janet Tavakoli provides readers with a comprehensive look at the CDO and structured credit products market amid recent developments. In addition to a detailed overview of the market, this book presents key issues in valuing structured financial products and important quality control issues. Tavakoli shares her experiences in this field, as she examines important securitization topics, including the huge increase in CDO arbitrage created by synthetics, the tranches most at risk from new technology, dumping securitizations on bank balance sheets, the abuse of offshore vehicles by companies, the role of hedge funds, critical issues with subprime, Alt-A, and prime mortgage securitizations, and securitizations made possible by new securitization techniques and the Euro. While providing an overview of the market and its dynamic growth, Tavakoli takes the time to explore the types of products now offered, new hedging techniques, and valuation and risk/return issues associated with investment in CDOs and synthetic CDOs.
User Ratings and Reviews
5 Stars Complex made understandable
Janet Tavakoli in her book Structured Finance & Collateralized Debt Obligations takes an extraordinary complex subject and makes it understandable. This subject matter can be headache inducing, but Ms. Tavakoli has such a good understanding of the subject that her writing is as interesting as it is comprehensive.
The last paragraph of this book encapsulates the reason every sophisticated investor needs to fully understand the world of Structured Finance:
“The future of finance is unclear. It is not as if finance needs more regulation. Bloated and ineffective global regulatory bodies abound. What is needed is effective regulation. Until that occurs, investors will have to fend for themselves and practice the fundamentals of prudent lending and investing.”
5 Stars Rosetta Stone
This book provides an insider view into the opaque world of structured finance and collateralized debt obligations. With its clear explanations of numerous structured-finance innovations, I expect this book to become the “Rosetta Stone” for deciphering these markets.
In addition, the book includes a lot of nuggets of wisdom on applying a value-investor discipline to structured finance. This is something that I hadn’t expected since the complexity of structured-finance instruments would give one the impression that this field is (and was) only a realm for rocket scientists. For example, in Chapter 5, Janet Tavakoli describes “The Leverage Paradox” whereby levering up equity (or even commodity) positions that are deeply distressed can make sense as a systematic strategy since the dramatic returns for correct bets can compensate for the inevitable downturns from such a strategy. But when leverage is applied to non-distressed debt securities, as was the fashion during the credit boom, disastrous results can (and did) happen with any air-pocket in the market, whether it is because of isolated cases of fraud or temporarily difficult liquidity conditions.
5 Stars Great Read
Janet Tavakoli has done it again and provided a concise and understood work on the complex field of structured financial products. In today’s world market downturn, Ms. Tavakoli continues to analyze in common sense form the credit crisis and the need for effective, though late to the game, regulation.
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