Principia Upgrades its Credit Derivatives Product

Wednesday 13 October 2004 13:23 CET | News

Principia has released the latest version of its credit derivatives product. The new release provides straight-through processing support of single-tranche CDOs (STCDOs), one of the fastest growing products in the credit derivatives world.

STCDOs expand on Principias coverage of the basket and portfolio credit derivatives products that are increasingly traded by a wide range of banking institutions, as well as insurance firms and hedge funds. As with all Principia instruments, the pricing, portfolio management and risk analysis and accounting of STCDOs will all be performed in a consistent valuation and operational framework common to all assets, liabilities and derivatives within the system. The addition of STCDO is part of Principias commitment to provide comprehensive support to its diverse client base trading credit derivatives, which includes structured finance companies, capital market groups, insurance companies and hedge funds. Principias credit derivative coverage includes: - Single-tranche CDOs - Credit default swaps (CDS) - Digital/binary credit default swaps - Credit default baskets (first to default and nth to default) - Options on CDS and cancelable CDS - Credit linked notes Credit derivatives within the Principia System apply intensity-based pricing models, which are based on market derived default probabilities and recovery rates. Transactional subtleties such as recovery payment delays, premium payment frequency and accrual and compounding assumptions are incorporated in the system. The product is distinguished by its flexible calibration capability, which enables users to imply default probabilities from traded debt or credit default swap prices, as well as from benchmark and exchange-quoted information.

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Categories: Payments & Commerce | Payments General
Countries: World
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Payments & Commerce