Click Here To Purchase From Amazon Credit Derivatives: A Primer on Credit Risk, Modeling, and Instruments

Title: Credit Derivatives: A Primer on Credit Risk, Modeling, and Instruments

Authors: George Chacko, Anders Sjöman, Hideto Motohashi, and Vincent Dessain

Publisher: Pearson Education, Inc. (Upper Saddle River, NJ)

ISBN: 0-13-146744-1

Credit Derivatives is a 256 page, hardbound book, with a suggested retail price of less than $70 (US).  It consists of 3 parts: (1) what is credit risk? (2) credit risk modeling, and (3) typical credit derivatives.  Though the word, “primer,” is included in the title of the book, this is not a book designed to be read by the layperson.  It is written for those with very strong quantitative skills or those with a graduate level understanding of finance, accounting, and/or economics.  The book is well-written, though parsimonious.

Structural and alternative approaches are covered in Part II: Credit Risk Modeling.  The Merton Model, Black-Scholes, Longstaff and Schwartz (with appendix), and Black and Cox’s extensions are addressed in this section.  The most well-know is, perhaps, Black-Scholes, and this might provide some prediction as to whether or not you are likely to find this part of the book of interest.  If you are not already quite familiar with Black-Scholes, this may not be a section that you would benefit from.  At least, not until after “tooling up” on this and related topics.

            Typical credit derivatives are covered in Part III.  Credit default swaps (CDSs) and collateralized debt obligations (CDOs) are included, as is an appendix on CDO pricing, theory and an example.  Again, this section requires relatively superior quantitative skills.  Those with less than superior skills in algebra, linear algebra, or strong, introductory skills in calculus will find this section difficult to benefit from.

            This book is likely to be of greatest interest to those with (or in the process of earning) their MBA, perhaps with a finance emphasis in their program of study.  CPAs and CFAs are likely to find the book of interest, if their practice warrants some benefit from this in-depth level of understanding of credit derivatives.  Certainly, I would expect this to be a “must read” for CPA auditors engaged to audit firms in the financial markets sectors.  Academics in mathematics, statistics, finance, or any business discipline are likely to find the book reasonably easy to read and digest, and certainly less rigorous than those papers on related topics and found in the academic literature.  It may, therefore, represent a welcome addition to their personal library as a non-academic reference source.

The above review was contributed by: Anthony (A.J.) Cataldo II.    Dr. Cataldo holds a PhD from Virginia Polytechnic Institute and State University , MAc ( University of Arizona)  unofficial minor in Marketing , BSBA  (University of Arizona). He is a Certified Management Accountant and a Certified Public Accountant:  Click Here to view Anthony's Reviews

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