Moody's integrates credit risk software with GFA

Moody’s Risk Management Services (MRMS) and California-based Gifford Fong Associates (GFA), provider of financial consulting and propriety analytical tools, have completed the integration of their default prediction and fixed-income portfolio management products and expertise.

MRMS and GFA have linked the MRMS suite of RiskCalc, a default prediction model for quantitative credit risk, and Genesis, GFA’s fixed-income portfolio analysis software.

MRMS claimed the integration would provide a tool for asset managers, investment banks and traders that can be used for capital allocation, hedging and the analysis of portfolio performance and sensitivity. It is intended to improve the analysis of credit-related portfolio risk and return profiles of portfolios of credit- and interest rate-sensitive assets such as bonds, derivatives and corporate loans.

Andrew Kimball, managing director of MRMS, said: “GFA is a leader in providing research and high-end fixed-income portfolio analytics. We believe asset managers will benefit greatly from the integration of Genesis and RiskCalc as a means to better understanding and managing the risk, and, as importantly, the performance of their fixed-income portfolios.”

Using MRMS RiskCalc models to estimate the default probability of a borrower or counterparty, Genesis clients can evaluate the credit-related risk exposure of their portfolios, including companies that do not have public credit ratings. “MRMS’ suite of RiskCalc products provides first-rate default estimations for our clients to drive the analysis,” said Gifford Fong, president of GFA.

“The ability to evaluate the credit-related risks for fixed-income portfolios in conjunction with other risks such as interest rate exposure is an important component of portfolio management. High quality default prediction models are key in this regard. Our agreement with GFA offers RiskCalc to clients as a precise means to integrate this analysis across an entire portfolio,” added Roger Stein, managing director of quantitative risk analytics at MRMS.

MRMS said this and the formation of Moody’s academic advisory and research committee is in response to a growing interest in credit models brought about by changes in supervisory practices for banks, and a series of highly publicised credit events in the capital markets.