Credit Default Swaps: The Vanilla Essence

In fast-paced financial environments with pressures on deal execution, and regulator focus on accountability-based governance, it’s important that financial and risk professionals understand the behaviour of credit default swaps (CDSs) for the purposes of risk management, when trading, and structuring complex products based on, the ‘plain vanilla’ CDS.

In Credit Default Swaps: The Vanilla Essence, Indra Rajaratnam provides an invaluable guide to the multifaceted risk considerations that stem from the structural features of a CDS (based on the 2014 Isda Credit Derivatives Definitions).

This book should appeal to CDS specialists within investment banking, risk management, asset management, product research and professionals in the hedge fund and insurance sectors. Similarly, regulators, lawyers, academics and students can benefit from the author’s chapter-by-chapter in-depth coverage of major CDS themes (including redenomination, orphaning and sanctions), clarification of key technical concepts and evaluative discussion topics.

Additionally, readers can learn from case studies and over 70 illustrations that have been incorporated to simplify product rules, along with Isda Determination Committee decisions over the 2009–22 period, giving readers a flavour of interpretation themes. The author also analyses basis risk considerations where both the 2014 and 2003 Isda Credit Derivatives Definitions are relevant, and, for a more holistic view of risk management, common structured product amendments and index provisions are covered.

Throughout, Rajaratnam highlights the importance of aligning risk management considerations with product behaviour. As the author emphasises, any time spent understanding the nuances of a CDS is always beneficial. By developing a better understanding of CDS risks, effective risk mitigation becomes easier.