Principia expands its credit functionality

Version 4.0 adds new products and calibration techniques for pricing credit derivatives and credit arbitrage products, the company said. The system covers credit default swaps, credit default options, creditdefault binary swaps, credit default swaptions, credit-linked notes and basket credit derivatives.

Principia said the system also allows for the risk measurement of instruments priced from disparate sources of credit market data. Principia said it ensures that prices are derived from actual and consistent market conditions. The system utilises intensity-based pricing models, which use market-derived default probabilities and recovery rates. Traders and risk managers can define and organise their own credit curves from their specified benchmarks.

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