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Algorithmics Launches Credit Derivatives Analytics Package


Date: Friday, August 20, 2004


By Susan L. Barreto, Senior Reporter : TORONTO (HedgeWorld.com)—A new pricing and risk analytics module for synthetic collateralized debt obligations and basket default swaps is the latest addition to Algorithmics Inc.’s risk management software. The module is integrated with Algorithmics’ mark-to-future framework. The integration allows for risk managers to incorporate basket and portfolio credit derivatives into their pricing and risk management frameworks and to keep their risk profiles consistent across their investment holdings. Users can rely on several valuation methods for their CDOs and basket default swaps within the Algorithmics module including a general Monte Carlo Simulation or Algorithmics’ own performance-enhanced analytical approach. Analytical approaches run hundreds of times faster than standard Monte Carlo simulations and pricing may be up to three times faster using Algorithmics analytical approach, said Diane Reynolds, Algorithmics director for analytics, in a statement. “Current systems often take a silo approach to basket and portfolio credit derivatives, preventing firms from creating a consolidated, coherent view of risk,” said Ms. Reynolds. “However, with this new module, risk managers have the option of treating basket and portfolio-credit derivatives in the same manner as other asset classes and aggregating risks across their holdings.” On the pricing front, Algorithmics rolled out a new pricing module last month that allows users to define and customize payouts for new structured products.