Moody's integrates credit risk software with GFA

The swaps will offer institutional investors, such as bank treasurers, portfolio managers, mortgage servicers and other over-the-counter market participants a regulated vehicle for hedging credit and interest rate exposures in the United States for the first time. But exchange-traded swaps, called Swapnote, have been available on the London Financial Futures and Options Exchange for some time already.

"Our new 10-year interest rate swap futures contract is the first in a complex of swap-related products that we are bringing to the market-place. Given the liquidity CBOT members bring to the exchange's contract markets, combined with recent volatility in spreads between treasury yields and credit risk yields, these contracts will offer institutional investors a timely and useful new vehicle for hedging... exposure referenced to the long-dated London interbank offered rate (Libor)," said CBOT chairman Nicholas Neubauer ."

Andrew Wallace, a broker with RJ O'Brien & Associates and a member of the CBOT board, stated: "Participants in the swap market are attracted to the CBOT 10-year interest rate swap futures contract because these futures will carry the AAA- rated guarantee of the Board of Trade Clearing Corporation (BOTCC). These contracts virtually eliminate credit risk, and allow hedge funds and other institutional traders to trade swap exposure without tying up credit lines."

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