Moody's Risk Management Services (MRMS) and Algorithmics are to jointly provide a set of XML-based product interfaces aimed at helping users better assess and manage portfolio credit risk.
Under the partnership agreement, MRMS's suite of RiskCalc default prediction models and Portfolio Credit Risk Engine (PCRE) will be linked to Algorithmics' credit portfolio analysis software. This integration, claim the companies, will enable banks, central banks, asset managers and traders to improve the analysis of the credit risk, credit capital and return profiles of portfolios of risky assets such as bonds, derivatives and corporate loans.
The integrated tool will be applicable for use in regulatory compliance, capital allocation, analysis of credit value-at-risk estimation of risk adjusted profitability, structuring of derivative hedges, and enterprise wide risk analysis, say the companies.
"The ability to analyse the portfolio-wide impact of credit decisions as they occur is a crucial component of prudent credit risk management. Our agreement with Algorithmics offers RiskCalc clients with complex derivatives exposures a powerful tool to understand these risks across their entire credit book," says Roger Stein, director of quantitative risk modeling at Moody's Risk Management Services.
The integration will be implemented through an XML (eXtensible Markup Language) interface between the Algorithmics and MRMS Web sites that will eliminate the need to export the data from one application and import it into the other in separate steps. The companies say the interface will give users the ability to update the risk exposures on their portfolios as the composition of the portfolios change or as obligors provide new information.