US banking giant Citigroup is rolling out the CreditMark loan pricing platform from credit risk outfit Moody's KMV to its global client base and internal trading desks.
CreditMark combines analytics and derived market data to value liquid and infrequently traded loans. The system enables quantification of complex components of loans, such as credit dependent pre-payment options, grid pricing and revolver utilisations.
Citi plans to use the CreditMark platform to value its illiquid loan assets as well as compare model prices to observed market prices in search of relative value.
Terry Benzschawel of Citi, says the partnership with Moody's KMV will enable the bank to provide its client base and internal trading desks with cutting-edge loan pricing and valuation analytics.
He says the CreditMark platform accounts for many relevant and highly complex aspects of loan structures, such as the credit dependent pre-payment option, that have previously been difficult to quantify."
"Citi will be able to value loans and loan-deliverable CDS (L-CDS) more accurately as well as assess their relative value to other assets in the capital structure," says Benzschawel. "With the CreditMark platform we will be able provide an enhanced level of services to our structured loan product issuers and clients."
Andrew Huddart, president of Moody's KMV, says the Citi partnership is a "direct response to changing industry dynamics where loan, bond and credit default swap markets are converging, making accurate loan valuation critically important".
"This unique venture with Citigroup will bring sophisticated Moody's KMV loan analytics to active participants in the institutional loan markets," says Huddart.