New software suggests credit risk is underpriced

Banks may be underestimating the risk involved in long-dated credit derivatives, if a new software package from Moody's KMV is correct.

The EDF 8.0 software predicts expected default rates for up to 10 years into the future, using a migration matrix, which predicts future default rates from current ones. It also uses an expanded database of previous defaults. Previously, a migration table was used which predicted future credit ratings from current ratings.

"The migration table problem is that it

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At a webinar in association with capital markets technology provider Numerix, panellists discuss the potential for increased adoption of the public cloud to boost investment performance, its impact on risk management and overcoming barriers to…

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