Profile:
Banc of America Securities
By
Dalia Fahmi
US Credit Published:
September 1, 2004
Janet
Tavakoli, a structured finance expert who advises institutional
investors and financial
firms, says conditions
have improved,
but risks remain. “There’s still a lot of controversy
about credit default swaps contracts,” she says. “The
biggest arguments I’ve seen are misunderstandings about
what the document said.... And it always comes down to not having
crafted the language more carefully up front because everyone
wants to do the deal.”
Because
the CDS market is so immature and many pitfalls have not been
recognized, even investment
banks sometimes assume
more
risk than they bargained for, says Tavakoli. “I’ve
talked to some arrangers who don’t realize they have equity
risk in their correlation books. These are banks who normally
don’t take down equity,” she says. “It boils
down to them not clearly understanding if you do a synthetic
deal and you sell the mezzanine tranche, that means you’ve
kept the equity.” In some cases, investment banks won’t
go out of their way to educate their clients, says Tavakoli.
END OF EXCERPT
Janet Tavakoli is the president of Tavakoli
Structured Finance, a Chicago-based firm that provides consulting to financial
institutions and institutional investors. Ms. Tavakoli has more than 20 years
of experience in senior investment banking positions, trading, structuring and
marketing structured financial products. She is a former adjunct professor of
derivatives at the University of Chicago's Graduate School of Business. She is
the author of: Credit
Derivatives & Synthetic Structures (John Wiley & Sons, 1998,
2001), Structured
Finance & Collateralized Debt Obligations (John Wiley & Sons,
2008).
Janet Tavakoli's
book on the global financial meltdown is Dear
Mr. Buffett: What An Investor Learns 1,269 Miles From Wall
Street (Wiley 2009).
Clients of Tavakoli Structured Finance have the benefit of proprietary consultation,
which is not available in any other paid or public forum. Clients also commission
proprietary research and analysis.
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