GFI launches Hull and White credit derivatives calculator

New York-based inter-dealer broker GFI has launched its credit derivatives pricing tool, Fenics Credit. GFI partnered with risk management and derivatives academics John Hull and Alan White to develop the tool.

GFI's offering, called Fenics Credit, prices for credit default swaps, forward default swaps, options on default swaps and cancellable default swaps. Pricing algorithms and risk analysis tools enable users to analyse default swap price sensitivities and responses to changes in specific factors, calculate implied default probabilities for a given recovery rate, and discover prices for illiquid entities through relative-value to benchmark curves.

Users can also price illiquid entities and non-standard contracts using credit curves based on independent, tradable credit default swap market prices rather than equity or bond data. According to GFI, Fenics Credit curves are not subject to the basis risks implicit in spreads approximated from non-default swap sources.

Fenics Credit is subscription-based and accessed via GFI's 'credit portal'. The tool is designed for all market participants in the credit derivatives market including traders, sales staff, risk and portfolio managers, and credit research analysts.

Hull and White, professors at the University of Toronto’s Rotman School of Management, are known for their applied research in the derivatives field and specifically the development of models that price exotic interest rate derivatives. Their partnership with GFI started in May 2002.