Markit Group Limited (Markit), the leading industry source for independent mark-to-market pricing and asset valuations, today announced it has launched a valuations service for inflation derivatives covering UK, US, French and European zero coupon swaps.
Twelve of the largest dealers in inflation derivatives are participating in the service which provides independent verification of mark-to-market prices for UK RPI (Retail Price Index), U.S. CPI (Consumer Price Index), Euro HCPIx (Harmonised Consumer Price Inflation ex tobacco) and French CPIx (Consumer Price Inflation ex tobacco) zero coupon swaps. Pricing goes out to 30 year maturities, with monthly granularity out to 5 years. Markit expects to add year-on-year swaps and floors by 2006.
This new service is part of Markit's Totem Service which is aimed at risk managers and product controllers on the sell-side, and which provides month-end independent valuations on OTC derivatives spanning credit, equity, currency, interest rates, energy, power, metals and structured products. The service is regarded as the market standard in price verification.
Bradford S. Levy, Managing Director, Firmwide eBusiness Group at Goldman Sachs commented: "Markit's new inflation service is the first of its kind, and will allow us to mark our month-end revaluations with more certainty. Given the wide spreads in the broker market, it will also provide us with very useful information on monthly seasonality out to five years, something that has been unavailable up until now."
Tim Barker, Executive Vice President of Markit and Head of Valuations said: "The increasing focus on P&L recognition and accounting issues has reinforced the need for independent price verification to enhance in-house risk management practices. The Totem Service has been growing steadily for the past eight years, and our new service is in response to a surge of client interest in highly structured interest rate derivatives and inflation-linked trades."