Fitch has today announced the acquisition of London-based credit derivatives analytics firm Reoch Credit as part of its drive to provide market risk assessment services for the synthetic collateralised debt obligation (CDO) market.
The move will give Fitch’s Risk Analytics Platform for Credit Derivatives (RAP CD) - a market risk assessment service launched by the ratings agency earlier this month - full ownership of Reoch Credit’s suite of pricing and risk analytics models.
“Credit risk and market risk are two very independent assessments. A CDO tranche may have a high investment-grade rating but could be subject to a lot of market risk volatility,” said Kimberly Slawek, group managing director at Fitch Ratings.
Slawek added: “We view our credit risk services as extremely rigorous. Our credit analysts do look at changes in corporate spreads that have the potential to be early warning signs of a change in credit rating. We look at RAP CD as an independent service that allows market risk assessment in synthetic CDOs."
James Wood, managing director of Reoch Credit, will join the RAP CD group in a senior role. Fitch has already integrated some of the newly acquired models into RAP CD and will incorporate the full Reoch Credit suite in forthcoming versions of the service.
Fitch is not acquiring the strategic advisory, consultancy and training businesses of Reoch Credit. Terms of the transaction were not disclosed.
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