New book shows how to make big bucks and get hot dates by modelling CDOs (almost)

It may have one of the least inviting titles imaginable, but the authors of a new book hope it will prove a godsend to anyone who needs to understand how CDOs work in practice.

“Cash CDO Modelling in Excel: a step-by-step approach”, which was published by Wiley Finance late last month, is the work of two structured credit specialists, WestLB’s head of credit structuring Darren Smith, and Pamela Winchie, managing director at Cross Point Capital.

“I’ve been through a couple of credit cycles,” says Smith. “And what I have seen each time is new people come in to the market and try to find a book that explains how CDOs work. There isn’t anything out there that is a hands-on, practical guide.”

The book is intended to be accessible to a broad audience and it is in fact much better written than most technical books on the financial markets. It is also clearly laid out, and interspersed with at-a-glance guides to some of the market’s tehnical jargon as well as practical tips for working in Excel. (An example: avoid the resource-hogging clipboard function and use a simple macro instead).

The book also includes a CD including sample models. “We have provided models that are totally transparent, allowing you to see how it works and how you can make changes to the models,” says Winchie.

Cash CDO Modelling in Excel is available in Europe from Amazon, and is due to be published in the US in July. It is also available via a website set up in conjunction with the book at www.cashcdo.com.