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Barra releases credit risk tool in Europe

26 April 2004  |  1341 views  |  0

Barra, Inc. (Nasdaq: BARZ), a global leader in risk management technology for investment professionals, today announced the availability of the latest version of its Web-based credit risk tool, Barra Credit™ 1.1 for Europe.

Barra Credit provides investors in European companies with a flexible framework to identify potential default risk earlier and more accurately, offering asset managers a way to supplement fundamental research with analytical tools. Leveraging implied measures of credit risk from bond, equity and derivative markets, Barra Credit provides the most insightful and comprehensive set of credit risk measures available for credit analysts and portfolio managers today. Barra Credit was originally launched for investors in U.S. companies in January. This updated version expands coverage to Europe, and now provides Barra Default Probabilities (BDPs) for over 8,000 issuers worldwide.

"The buy side has very specific and unique requirements around understanding credit risk," said Debbie Williams, group vice president for Boston-based analyst firm Financial Insights. "Since there are many approaches to evaluating credit quality, the use of multiple indicators is of great value. Vendor support for buy-side credit has been virtually nonexistent and we are pleased to see the entrance of new tools to meet this need."

Barra Credit now available in Europe
Professional investors who cover European companies can now make full use of the benefits of Barra's market-implied measures of credit risk. Easy to deploy and use, Barra Credit provides accurate and timely identification of credit default risk, as well as insight for investors through a unique assembly of different credit metrics:
  • Barra Default Probabilities (BDPs) – estimate the probability of default based on equity market behavior. Demonstrated to be a consistent early indicator of the likelihood of default, BDPs utilise an "incomplete information" framework that outperforms traditional structural credit risk models;
  • Barra Implied Ratings - leverage information from the bond market to create a credit rating comparable to agency ratings. These ratings can provide an early signal for upgrades and downgrades; and,
  • Credit Derivatives (credit default swaps) - offer a third view on credit that often provides a leading indication of deteriorating credit and emerging value. Credit default swap (CDS) price trends and cash-CDS basis tracking can identify threats and opportunities within the credit markets.

    "Credit has gone from one difficult extreme to another," said Tim Backshall, director of global credit markets strategy for Barra. "After a period of extraordinary default rates in Europe, spreads have now tightened to levels we have not seen in years. Managers must find exceptional value to outperform, and avoid losers such as Parmalat at all costs. Barra Credit is the first credit analysis platform to bring together three important measures of credit risk, created specifically for asset managers."
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