Pricing Partners, the independent valuation expert and a world leader in mathematical models and analytics for derivatives and structured products, announced today the release of several new tools for ABS valuation.
This announcement comes during a crucial time when the demand for independent valuation on ABS and similar non-liquid products is very strong. The recent crisis in the credit markets has called for independent valuation and analysis on ABS, MBS and similar products. Investors can no longer rely solely on rating indicators, as many triple-A ABSs have been trading at relatively low prices.
These valuation tools are strengthening the credit module of the Pricing Partners libraries, enabling to value similar or derived products like CDOs of ABS, RMBS, etc. Within this new framework, the user can take into account both the pre-payment risk and the default risk. The user will be able to mark its own assumptions and to use market data coming from traditional platforms like Intex or Bloomberg.
Marian Ciucă, head of quantitative research at Pricing Partners, precised: "First of all, the chosen amortization profile is calibrated in order to match the observed average life of the ABS bond. Then, using the ABS bond price we bootstrap the default intensity of the underlying, and imply the survival probabilities. We also offer to our clients the possibility to use the last model, publicly available, used by Fitch for their CDOs of ABS. Several other Factor Copula models, available in our Library, can be also used to valuate CDOs of ABS."
Eric Benhamou, CEO of Pricing Partners and a former Goldman Sachs employee added: "The independent valuation of ABS and all related products has become a large concern for most of our customers due to the lack of information and transparency on this market. Pricing Partners libraries were already encompassing the description and the pricing of many asset classes. With this new framework, Pricing Partners strengthens its leading position in the independent valuation fields and now offers its customers the widest coverage in terms of financial products. "