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Preface xi
About the Authors xv
Chapter 1 Introduction 1
Part 1 The Cash Market 2
Part 2 The Structured Markets 3
Part 3 The Synthetic Markets 4
Part 4 How to Trade the Leveraged Finance Market 5
Part 5 Default Correlation 6
Part 1 The Cash Market 9
Chapter 2 The High-Yield Bond Market 11
The Reasons Companies Are Classified as High-Yield Issuers 11
Size and Growth of the Cash Market 13
Types of Structures 21
A Look at Ratings 22
Risk and Return for Bonds 26
What's Priced In? 31
How About Recoveries? 35
Summary 37
Chapter 3 Leveraged Loans 39
A Tale of Two Loans 39
Introduction to Leveraged Loans 42
An Overview of Loan Terms 56
Loan Recovery Rates 65
Loan Default Rates 73
Summary 79
Part 2 Structured Market 81
Chapter 4 Collateralized Loan Obligations 83
Understanding CLOs 83
Elaborations and Details 92
Summary 104
Chapter 5 CLO Returns 105
Default and Recovery Scenarios 105
Distressed Loan Prices, Overflowing Triple-C Buckets, and CLO Returns 119
Summary 129
Chapter 6 CLO Portfolio Overlap 133
Collateral Overlap in U.S. CLOs 134
Collateral Vintage vs. Deal Vintage 142
Favorite CLO Credits 142
Single-Name Risk and Tranche Protections 146
Excess Overcollateralization and Excess Overcollateralization Delta 150
Senior and Subordinate Excess OC Deltas 151
Equity Tranches and Distressed Tranches 157
Summary 157
Part 3 Synthetic Markets 159
Chapter 7 Credit Default Swaps and the Indexes 161
What Are Credit Default Swaps? 162
Who Uses Protection, and for What? 168
Growth of the Market 168
Marking-to-Market: SDV01 170
Credit Default Swaps Indexes 172
Contrasting the LCDX and CDX Indexes177
Beta: A Study of Movement 178
Summary 183
Chapter 8 Index Tranches 185
Basic Mechanics of the Tranche Market 185
Loan Tranches 195
Summary 199
Part 4 How to Trade the Leveraged Finance Market 201
Chapter 9 Recessions and Returns 203
Broad Market Performance 204
Sector Performance 207
Performance by Rating 207
Summary 210
Chapter 10 Framework for the Credit Analysis of Corporate Debt 211
Approaches to Credit Analysis 211
Industry Considerations 216
Financial Analysis 220
Quantitative Models 232
Summary 233
Chapter 11 Trading the Basis 235
The Basic Basis Package 236
Constructing the Basic Package 236
Moving Away from the Basic Model 240
Adding Positive Convexity 249
Negative Convexity 254
A More Complex Basis Package 255
Hedge Ratios for CLO Hedging 259
Summary 260
Chapter 12 How Much Should You Get Paid to Take Risk? 263
Single-Name Credit Risk 263
Curve Risk 267
Basis Risk 269
Capital Structure Risk 274
Summary 281
Part 5 Default Correlation 283
Chapter 13 Default Correlation: The Basics 285
Default Correlation Defined 285
Default Probability and Default Correlation 291
Summary 309
Chapter 14 Empirical Default Correlations: Problems and Solutions 311
Empirical Results 311
Problems with Historical Default Correlations 315
Proposed Solutions 318
Summary 333
Index 335
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David Aplin
reviewed Leveraged Finance: Concepts, Methods, and Trading of High-Yield Bonds, Loans, and Derivatives on July 28, 2017
Leveraged Finance: Concepts, Methods, and Trading of High-Yield Bonds, Loans, and Derivatives
Yay for empire!
Another book from the vaguely centrist right, you know them, those economists and Greek translators and philosophers from the University of Chicago who assisted Pinochet in his fascist coup, won Nobel Prizes, misconstrued Plato to fit their world-view (I'm looking at you, Leo Strauss), and finally, today, when they are primarily involved in teaching a new generation to do the same things.
Well, Ferguson perhaps isn't so vehemently rabid about his political beliefs, and he doesn't teach in Chicago. But he is their counterpart: the British free-trader. Only he has something the Chicago boys don't: that very old and very British urge to colonize those who have defaulted on their debts. We who are not so verse in financial lingo tend to call this imperialism, a much more effective imperialism because so incredibly beneficial to those who have the most to gain.
Ferguson does a very good job of making economic theory as understandable as possible (which means that I understood and could possibly recall about 30% of those unyielding financial terms and theories). It's an excellent day when intelligent historians do not stoop to "our" level to be understood: Ferguson makes his point without relying on that pitfall of historical writing: making history uncomplicated.
And yet, oh, and yet. The closest thing to socially adept you're going to get here is the gold standard, which by any standard (including its own) is a dangerous illusion of stability. And don't even think for a minute that Ferguson will even mention the naughty word "labor" as applied to a working force. He does his best to put a pretty, imperial British mask over his rough, working-class Scottish face, but for all his talk of bubbles and busts and liquidity and illiquidity and real estate and S & L, you have to wonder: is it possible that something so vacuous as a number on a screen can define us, politically, culturally, and spiritually? It's kind of a scary predicament, and _The Ascent of Money_ not only sets out to prove that this is true, it also aspires to show that "Planet Finance" is an evolutionary process, almost as evolutionary as evolution itself, with a little more ideology thrown in. The last chapter "Chimerica" is one reason to read the book (or at least that chapter) as it portrays a clear-sighted analysis of the US-China situation, which is becoming more intricate and dangerous each day.
It is a minor but slightly important book, more about finance than financial history. Then again, maybe finance is financial history.
I think it's time for some Naomi Klein.
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Add Leveraged Finance: Concepts, Methods, and Trading of High-Yield Bonds, Loans, and Derivatives, Leveraged Finance is a comprehensive guide to the instruments and markets that finance much of corporate America. Presented in five sections, this reliable resource-which contains the in-depth insights of Stephen Antczak, Douglas Lucas, and Frank Fabozzi-, Leveraged Finance: Concepts, Methods, and Trading of High-Yield Bonds, Loans, and Derivatives to the inventory that you are selling on WonderClubX
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Add Leveraged Finance: Concepts, Methods, and Trading of High-Yield Bonds, Loans, and Derivatives, Leveraged Finance is a comprehensive guide to the instruments and markets that finance much of corporate America. Presented in five sections, this reliable resource-which contains the in-depth insights of Stephen Antczak, Douglas Lucas, and Frank Fabozzi-, Leveraged Finance: Concepts, Methods, and Trading of High-Yield Bonds, Loans, and Derivatives to your collection on WonderClub |
