Eight years ago, I reviewed a book, Equity Derivatives, edited and partially authored by Mayer Brown London-based partner Edmund Parker. Recently, Mr. Parker wrote a follow-up tome, this one entitled Credit Derivatives: Understanding and Working with the 2014 ISDA Credit Derivatives Definitions. My colleague Kurt Leeper of Shapiro Bieging Barber Otteson LLP's Denver office was kind enough to review the book, and the following is his review. Yes, we're still wonks and nerds, but hey: someone's got to be.
The financial world in 2017 is a very different one from that which existed in 2007, the year in which Edmund Parker’s Credit Derivatives: Documenting and Understanding Credit Derivative Products was first published. It is in this altered world of 2017 when Mr. Parker’s helpful successor to that book, Credit Derivatives: Understanding and Working with the 2014 ISDA Credit Derivatives Definitions, is finding its way to bookshelves. As Mr. Parker helpfully notes in his book, in late 2007 there was a notional $62 trillion of credit default swaps outstanding, while in late 2015 that amount had shrunk to $12.3 trillion (albeit with a significant portion of that decline being due to trade compression). The tradeoff has been a better organized market, and while the storm has passed, so to speak, the stated mission of Mr. Parker’s book is to continue that of its predecessor: to create a better understanding of credit derivatives products, and in particular the new 2014 ISDA Credit Derivatives Definitions. In short, the book succeeds admirably in accomplishing that mission.
Over the course of Credit Derivatives’ 500-plus pages, Mr. Parker ably achieves this goal through a combination of lucid prose, well-organized charts and helpful examples. The book is divided into four main sections, providing an overview of credit derivatives and the market, an overview of the 2014 ISDA Credit Derivatives Definitions and changes from their predecessor versions, an in-depth discussion of the 2014 ISDA Credit Derivatives Definitions and finally a catch-all section providing an overview of a number of related topics.
Like most books of its nature Credit Derivatives will appeal to two distinct audiences. First, there is the reader with no or minimal experience with credit derivatives but who seeks a reasonable understanding of such instruments; to speak the language, so to speak. This reader will find significant value in Mr. Parker’s book and would indeed be well-served simply by reading the first of the above-described four sections of the book, which covers over 100 of the book’s densely packed pages. Throughout, Mr. Parker helpfully sets out the parties who use certain derivatives and why while also providing illustrative hypothetical and real-world case studies.
Second, there is the practitioner who, whether on an infrequent or regular basis, deals with credit derivative-related issues in his or her practice (or, just as likely, lacks the free time or inclination to read through an entire book on the subject). This reader, too, will find plenty of use in keeping a copy of Credit Derivatives handy on a nearby bookshelf. It is this reader at whom the majority of the book is focused, as in-depth discussion relating to the 2014 ISDA Credit Derivatives Definitions spans the majority of its pages. Mr. Parker helpfully breaks down the discussion on an article-by-article basis, making for quick, easy reference when necessary.
While in the last 10 years the world may have changed and the world of credit derivatives with it, the value of understanding these seemingly arcane instruments is as great as ever. To this end, whether a weekend reader or a seasoned practitioner, a reader of Credit Derivatives: Documenting and Understanding Credit Derivative Products will find all that is required to ensure that he or she is knowledgeable about the book’s subject matter for many years to come.