Leveraged Finance: Concepts, Methods, and Trading of High-Yield Bonds, Loans, and Derivatives

Preface

Over 80% of my portfolio is sitting in T-bills. This cannot continue. I know that the economy is under extreme pressure and the fundamental backdrop is terrible for almost all asset valuations, but I cannot justify holding government securities paying 0% to my investors. They can do that on their own. I do not need an asset that is perfectly safe, what I am looking for is something that offers attractive risk-adjusted return potential. What in your market fits this profile? Leveraged loans? Triple-A CLO tranches? Anything?

 

—A portfolio manager of a large equity fund, January 2009

 

This book was written during one of the most trying times in the history of the global financial markets. The financial crisis that began in 2007 has prompted unprecedented volatility in asset valuations and has left many economies across the world in recession. Given such an extreme investment environment, market participants may have to employ nontraditional approaches when making investment decisions in order to maintain an appropriate risk-return profile. We believe that the leveraged finance market can be a very important tool in this regard.

This book will not attempt to predict the future of the financial markets or the ultimate outcome of the financial crisis. Rather, the purpose of this book is to help readers understand the principles of the leveraged finance market. In this book, readers can learn about the tools available in the leveraged finance market, how they are related to assets ...