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Fitch Ratings acquires Reoch's credit derivatives analytics business

31 July 2006  |  2588 views  |  0 Source: Fitch Ratings

Fitch Ratings Ltd, a Fitch Group, Inc. company, has acquired the credit derivatives analytics business of Reoch Credit Ltd and will assume full ownership of Reoch Credit's suite of pricing and risk analytics models.

Reoch Credit Managing Director James Wood, will join Fitch's Risk Analytics Platform for Credit Derivatives (RAP CD) group in a senior role.

On July 19, Fitch introduced RAP CD, a breakthrough market risk assessment service for the Synthetic CDO market. With RAP CD, market participants can independently quantify mark-to-model prices, key risk exposures, and the elements driving volatility, thus providing users with unprecedented transparency from origination throughout the length of an investment. A number of the newly acquired models have already been integrated into RAP CD and Fitch will be incorporating the full Reoch Credit model suite in forthcoming versions of the service.

"The acquisition of Reoch Credit's model suite and the arrival at Fitch of specialists like James Wood and his team further enhances Fitch's established data, analytics and research initiatives that provide the capital markets with forward-thinking and greater transparency in this burgeoning market," said Stephen Joynt, Chief Executive Officer, Fitch Ratings. "This acquisition is a testament of our commitment to broaden our Credit Derivatives risk analytic services to provide the market with insight for both credit and market risk. RAP CD provides market-proven pricing and risk functionality driven by experienced quantitative thinkers."

"Fitch's new market risk platform adds a valuable dimension to its traditional strength in credit risk evaluation," added James Wood. "I am very excited by the opportunity to join Fitch at this time and look forward to leading many new and compelling initiatives."

Reoch's Model Suite

Reoch Credit developed its first credit derivative analytic toolkit in early 2003. Since then it has been continually updating this package to ensure that it remains at the leading edge of available credit derivative analytics. The model suite covers the full range of traded credit derivative products and has been benchmarked over the past three years. A partial list of models includes:

  • Credit default swaptions
  • Constant maturity credit default swaps
  • Nth to default swaps
  • FTD options
  • Index swaps
  • Index swaptions
  • Semi-analytic base correlation CDO models
  • Skew models for CDO
  • Forward portfolio loss models for CDO
  • Non-gaussian copulas
  • Stochastic recovery rates
  • Tranche options
  • CDO Monte Carlo models
  • CDO 2 models
  • Leveraged super senior swaps
  • Efficient Monte Carlo methodologies for evaluating portfolio products

    Fitch is not acquiring the strategic advisory, consultancy and training businesses of Reoch Credit. Terms of the transaction were not disclosed.
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