Mark-It buys Loan-X

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Mark-It Partners, a provider of cash bond and credit default swap pricing data, has acquired Loan-X, a provider of loan pricing data.

According to Lance Uggla, founder and chief executive of Mark-It: “We have a cash securities database and reference entity data (Red) and were looking to complete our coverage of the credit asset class. Loan-X is a leader in the provision of data on loans and so it was the perfect fit.”

Both firms are based on a similar model, receiving pricing data from the banks, cleaning the information up and aggregating it before selling it back to the banks and on to investor clients.

Together, Mark-It Partners and Loan-X provide pricing data that covers practically the entire credit market. Geographically they complement each other – Loan-X is based in the US and Mark-It Partners is based in London.

Michael Rushmore, chief executive of Loan-X, will become executive vice president of Mark-It Partners with responsibility for the strategy and distribution of the merged company’s products in North America.

Mark-It also intends to produce convertible bond price data early in the New Year, which means the only part of the credit market not covered will be asset-backed securities, an area Uggla hopes the firm will be covering by the end of 2004. “If there is a reference entity out there with bonds and loans outstanding that trades in the credit default swap market then we can map all the assets,” he says.


Barra Credit launched

Barra, a Berkeley, California firm specializing in financial risk management software, will launch Barra Credit in January this year. The new product provides assessments of corporate credit quality by looking at the cost of credit default swap protection and the equity value.

Probability of default models that use either a company’s equity valuation (the Merton model is the most well known) or the cost of CDS protection (reduced form model) already exist, however according to Barra there are as yet no models that use both as inputs. This is the first time such a model has been produced, says Barra.

“Both equity- and CDS-based models have their advantages and their drawbacks,” says Jean-Martin Aussant, director of product strategy at Barra, “so by taking a hybrid approach we hope to remove the disadvantages.” According to Aussant, one of the main drawbacks of the Merton approach is the assumption of perfect information that is sufficient to dramatically distort the resulting predictions of default. By creating a model that utilizes both inputs rather than just one, such distortions can be removed.

Barra Credit is designed to be used by institutional investors in corporate bonds, as opposed to previous versions of the model which have largely catered for bank lending departments.

While the price is not certain yet, Barra is talking of charging $20,000 per year for the basic product.

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