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Asset-Backed Credit Derivatives

By Peter B. Nowell


Accessible to investors at all levels, this is a detailed market overview covering everything from pricing and legal issues to market practices and common pitfalls in dealing with asset-backed credit derivatives (ABCDs).

Publish date: 3 Mar 2008

Availability: In stock


Book description

In response to the US sub-prime fiasco and the current liquidity crisis, this is a cutting-edge treatment of credit derivatives linked to asset-backed securities such as mortgage-backed securities and collateralised debt obligations (CDOs).

Written by an experienced trader, this pioneering guide focuses on real-life examples and deals, rather than theory or complex maths. Accessible to investors at all levels including:

  • The asset-backed credit derivatives
  • Credit default swaps on asset-backed securities (ABS)
  • Credit-linked notes and total return swaps
  • Index swaps
  • Synthetic securitisation
  • Synthetic CDOs of ABS
  • Issues in pricing and modelling
  • Investment vehicles.

It contains comprehensive case studies highlighting the key issues to consider in structuring or risk managing such deals.

This pioneering book is recommended reading for credit investors including traders, investment managers and pension fund trustees.

Book details

Publish date
3 Mar 2008
155mm x 235mm

Author biography

Peter B. Nowell

Peter Nowell is head of ABS correlation trading for BNP Paribas, based in London, and joined in October 2007. He is responsible for pricing and risk management of products based on portfolios of ABS, with both US and European assets.

Prior to BNP Paribas, Peter was head of ABS correlation at The Royal Bank of Scotland Plc in London, after moving across from their Principal Investments team. He has also worked as a structured credit trader for Nordea Bank in Copenhagen, Denmark and for CDC IXIS Capital Markets in London, as well as for Royal Bank of Canada. He has been involved in the credit derivatives market since 1997 and has traded bonds, credit default swaps, corporate correlation products and asset-backed securities during that time. Peter qualified as a chartered accountant with Coopers & Lybrand in 1997 before moving into banking, and obtained a degree in Combined Studies from Durham University in 1993.

Peter has written and co-written a number of articles on credit derivatives for publications including Futures & OTC World, Global Securitisation Review and Banque Stratégie. He has also given lectures at a number of conferences, including those organised by Incisive Media, the European Pension Fund Investment Forum and the Nordic Capital Markets Forum.

Table of contents

List of Figures

List of Tables

About the Author

1. Introduction

A brief history of securitisation

A brief history of credit derivatives

The start of credit derivatives on asset-backed securities

Market participants

2. Credit Default Swaps on Asset-Backed Securities

CDSs on CDOs

CDS on other ABS Categories

Old documentation trades

Uses for CDS on ABS

Market strategies

3. Credit-Linked Notes and Total Return Swaps

Credit-linked notes

Total return swaps

4. Index Swaps





5. Synthetic Securitisation

Synthetic RMBSs

Synthetic CMBSs

Synthetic Collateralised Loan Obligations

Collateralised Bond Obligations

Counterparty Risk Securitisations

Other risk types

6. Synthetic CDOs

High-grade CDOs of ABSs

Hybrid CDOs of ABSs

Cashflow and collateral triggers

Triggerless deals

The role of the manager

The role of the lead manager/underwriting bank

ABS correlation

Principal finance CDOs of ABSs

CDO2 deals

Investment analysis for CDOs

7. Issues in Pricing and Modelling

Single-name CDS on ABS

Cashflow and Hybrid CDOS of ABSS

Single-tranche CDO of ABS

8. Investment Vehicles


Structured Investment Vehicles


Credit Derivative Product Companies

9. Distressed Investments

Recent History

Distressed Trading

Trade Ideas

10. Conclusion

Lessons from Corporate Credit Derivatives

ABS Correlation as a Market

The On-Balance-Sheet Future

Reforming the CDO of ABS Market

Avoiding Moral Hazard

Avoiding Legal Hazards

Transparency and Liquidity

The Future of the Monolines

Super-Senior Risk

Risk Transfer

Particle-Finance Theory

Cross-Asset Trading

Summing up



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