Inter-dealer broker GFI has partnered derivatives researchers John Hull and Alan White from the University of Toronto to develop and release a new credit derivatives pricing calculator, Fenic Credit.
The subscription-based application can be accessed from GFI's Credit Portal. The vendor says Fenic Credit will improve market liquidity and set standards for pricing for all participants in the market.
Users will be able to price liquid entities and non-standard contracts using credit curves based on credit default swap (CDS) market prices rather than equity or bond data.
In addition, Fenics Credit's pricing algorithms and risk analysis tools will enable users to analyse default swap price sensitivities and responses to changes in specific factors (what if analysis), calculate implied default probabilities for a given recovery rate and discover prices for illiquid entities through relative value to benchmark curves.
Matt Woodhams, Global Product Manager Analytics, GFI says the credit derivatives market has grown exponentially in recent years but many market participants have lacked the necessary tools to manage and accurately ascertain risks.