Quantifi releases enhanced base correlation calibration for volatile markets

Source: Quantifi

Quantifi, a leading provider of analytics and risk management solutions for the global credit markets, today announced a set of enhancements which solve the common CDO correlation calibration problems experienced by market participants.

Quantifi is first-to-market in offering these new methods to participants in the global credit markets.

The recent volatility in the credit markets has made CDO base correlation calibration difficult for some parts of the capital structure. For example, the 15-30% tranche on the Investment Grade CDX index has occasionally traded at levels which will not calibrate using common CDO pricing techniques.

"Our clients have been keen to see a reasonable solution for base correlation calibration for this market environment," says Rohan Douglas, CEO and Founder of Quantifi, Inc. "We have been working closely with select clients to implement a number of techniques which guarantee robust and fast calibration in a way that is consistent with current market best practice and do not rely on arbitrarily adjusting model assumptions such as recovery rates."

Enabling standard CDO Copula models to calibrate across a wide range of market environments, the new models include:
  • Top down or inverted calibration techniques
  • Extended factors which greatly expand the range of market quotes that can be calibrated
  • Numerical techniques that greatly speed up and stabilize calibration at high correlations

Quantifi's enhanced base correlation calibration is available in the latest release of Quantifi XL.

Comments: (0)