Book Review: Leveraged Finance

It is often the markets that are not widely publicized by the popular press or closely followed by analysts that present the most complex challenges and most attractive rewards. The authors of Leveraged Finance: Concepts, Methods, and Trading of High-Yield Bonds, Loans, and Derivatives understand that, and have put together a comprehensive overview that will orient new investors and prompt industry veterans to reevaluate some fundamentals.

Stephen Antczak, a UBS executive director within fixed income research and current head of the company’s leveraged finance strategy group, joins here with Douglas Lucas, from Moody’s ratings research team, and Frank Fabozzi, a respected author on the financial markets. They walk through the basics, starting with high-yield bonds and loans, then venture into rockier territory—collateralized loan obligations and default correlation. And there’s extended discussion of the synthetic markets, which include instruments like credit default swaps.

The central principle of Leveraged Finance is the application of concepts to real-world trading. The entire latter half of the book is devoted to corporate credit analysis, demonstrating how to evaluate corporate issuers and take a risk position, something every investor should consider prior to any investment decision. Investors involved in cross-asset and capital-structure strategies will be most interested in the arguments regarding compensation for a risk position. The detail the authors provide about subordination and hedging strategies is remarkable. They take care to address the factors that can often be overlooked, particularly in the case of nontraditional investors.

The section on default correlation is also exemplary. Not only are the concepts explicated with meticulous clarity, but the authors’ insight into the drivers of correlation will be extremely valuable for investors who are looking to properly hedge their credit portfolios.

While much of the information contained in this book brings a fresh perspective to the underlying issues that are currently impacting the financial markets, Antczak, Lucas, and Fabozzi have created a resource that will be invaluable to traditional and nontraditional investors long after the market recovers.

–Chris Hazelton is a director in the global credit strategy team at UBS Investment Bank.

Comments

[Josh]

Great book suggestion, I have been wondering about the intricacies of CDOs. Thanks for recommending.