Bear, Stearns & Co has released its Price Adjusted Credit Risk Evaluator (Pacre), a tool for predicting defaults, recovery rates and call rates on high yield Collateralised Debt Obligations (CDOs).
Pacre will allow investors to analyse the interaction between structure and collateral by using default rate projections based on objective, market-determined criteria, says the firm.
The model also allows investors to rank high yield CDOs consistently, using model generated Bear Stearns Default Scores (BDS).
Both tools are available through the proprietary Bear Stearns analytic system, BondStudio, developed by the firm's fixed analytics and structured transactions department (Fast).
Bear Stearns says that Pacre, which has already been implemented and is used by its salesforce and traders, will now be available to clients.
Tom Marano, group head of mortgages, Bear Stearns, says he believes the new system will be an essential tool to traders and investors and will enhance liquidity in the secondary market for CDOs.