CreditGrades launches with three backers

Launched today, CreditGrades will provide benchmark prices for five-year default swaps, using the firm-value model described in a Risk (November 2001) magazine technical article by George Pan, vice-president in credit derivatives research at JP Morgan Chase in New York.

CreditGrades, developed over a six months period by JP Morgan Chase and RiskMetrics, the New York-based risk technology firm, provides indicative credit spreads based on observable market quantities such as equity price history, balance sheet information and a standard set of model assumptions. Hedge funds, insurance companies, banks and asset managers are among the intended client base.

CreditGrades.com provides free daily CreditGrades for about 5,000 public firms in North America and Europe. The product includes monitoring and model sensitivity functionality, as well as technical documentation. RiskMetrics will also market historical CreditGrades data as part of its DataMetrics service, costing between $50,000 and $100,000 per year, and will integrate CreditGrades into CreditManager and RiskManager, its Web-based credit and market risk management applications.

The three broker-dealers, which share a large portion of the credit derivatives market, said their endorsement of CreditGrades was geared to promote price transparency in the credit derivatives market.

RiskMetrics chief executive Ethan Berman told RiskNews there had been more than 1,000 hits in the CreditGrades website by 8.30am Eastern Seaboard Time.