"The Credit Derivatives Bible – Updated with All New Material for 2022The third edition of Janet Tavakoli’s seminal comprehensive book on credit derivatives takes a fresh approach with a focus on profitable trading strategies in troubled times: RMBS, synthetic mortgage-backed securitization, structured credit products, related derivatives, and the future direction of the market. Tavakoli explains what works and what does not work. Together with her book, Structured Finance and Collateralized Debt Obligations, she notes the flaws and opportunities in debt obligations leveraged with credit derivatives. (See details after the review)REVIEW“Notably, Tavakoli’s research work has been endorsed by, for example, the late Nobel prize winner, Merton Miller, and The Big Short hedge fund manager, Michael Burry.Of interest to commodity traders is the book’s section on the collapse of the Futures Commission Merchant, MF Global. She discusses ‘[how] MF Global went bankrupt in a triparty repo trade that was, in substance, a total return swap for which it could not meet margin calls."Intelligent Commodity InvestingHow did one use credit derivatives to short the ABX index and why was it such a good idea? How does one use total return swaps to go short or long credit risk? What is triparty repo? What are the pitfalls of derivatives transactions? What are the good ideas today? Which trades are most likely to have the most upside with the least downside? Which are most likely to pose high risk for little reward? This is the book that answers these questions.This third describes the wide range of products in the second edition plus many more:* Arbitrages: regulatory capital, CDOs, economic capital, convertible bonds, et al.* Asset swaps, plain vanilla par credit default swaps, and why they are still trading benchmarks* LIBOR, SOFR, SONIA, SARON, et al.* How value-destroying credit derivatives, residential mortgage-backed securities (RMBS), mortgage-backed bonds, and synthetic collateralized debt obligations contributed to the global financial crisis of 2008* How to recognize the fraud quadrangle, how to avoid it, and how to profit from others’ fraud* How various Big Short trades work* JPMorgan's anti-Big Short London Whale trade* Total Return Swaps (TRS)* Creating synthetic securities and structured credit products* Language issues.* Information Asymmetry* Repo and reverse-repo* Triparty repo* Credit default swaps and options* Basis risk, materiality, termination payments* Pricing and applications* Exotic structures*Asset swap switches* Synthetic lending facilities* Prorata default structures* Basket default swaps* Basket default options* Currency convertibility* Sovereign Credit Default Swaps* Credit Linked Notes (CLNs)-reasons for CLNs, black box structures, collateralized loan obligations, hybrid securitizations* Sovereign risk and emerging markets-tax arbitrage, cross border issues, special event risks, pricing convertibility protection* Failure of credit derivatives in certain sovereign transactions* The Big COVID-19 Shorts* Future opportunities due to the high “Corruption to Production Ratio”And much more.Praise for Janet Tavakoli“Clear and pacy. She knows her stuff, has strong opinions.” On the financial crisis: “There is a healthy dose of ‘I told you so’, but Tavakoli is one of the few who did.”—The Financial Times
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