About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

Fitch Solutions Offers Liquidity Scores for Credit Derivative Assets

Subscribe to our newsletter

Fitch Solutions has created new liquidity scores and percentile rankings for widely traded credit derivative assets aimed at helping banks to identify their exposure to the most liquid and least liquid assets, and strengthen their liquidity risk management procedures. Thomas Aubrey, managing director of Fitch Solutions, explains that the data has been added to provide more insight into the liquidity of the credit default swaps (CDSs) market.

Each asset is assigned a score, representing the most through to least liquid names, and then given a global percentage ranking according to its liquidity profile against the overall CDS universe, says the vendor.

“Given the market focus on liquidity risk, and recent Basel Committee guidance, understanding the relative liquidity of assets is critical for banks in assessing how they fund their short term liabilities and helping them to meet regulatory commitments,” Aubrey explains. “For the first time, risk managers will be able to compare the relative liquidity of assets across regions, sectors and rating bands, as well as having information on the liquidity of an asset and the broader CDS market over time.”

This initial launch is open to member banks of Fitch’s global pricing services consortium, who provide Fitch with pricing information on a variety structured finance and fixed income derivative assets. However, the launch will be extended to buy side market participants next year, says the vendor.

Fitch Solutions has also published new research on liquidity risk in the CDS market, which highlights that liquidity does not necessarily worsen as credit quality worsens. “Fitch Solutions’ research not only separates the two but actually highlights that this assumption has not been the case for the last three years,” says the report.

It also indicates that the CDS market has in general become more liquid despite many assets becoming less liquid, and that specific credit events play a key role in determining the liquidity of an asset. “In times of financial stress, asset markets tend to become less liquid; however, when the nature of the market is to provide protection on the underlying assets, this should not necessarily be the case,” states the report.

However, this liquidity does not mean that liquidity risk has become unimportant, as many assets have become less liquid, even though average liquidity has increased, says the report. “From a liquidity risk management, knowing which assets are likely to become less liquid is absolutely key,” it states.

Subscribe to our newsletter

Related content

WEBINAR

Upcoming Webinar: ESG data sourcing and management to meet your ESG strategy, objectives and timeline

Date: 11 June 2024 Time: 10:00am ET / 3:00pm London / 4:00pm CET Duration: 50 minutes ESG data plays a key role in research, fund product development, fund selection, asset selection, performance tracking, and client and regulatory reporting, yet it is not always easy to source and manage in a complete, transparent and timely manner....

BLOG

Brown Brothers Harriman Evolves Data Offerings with Infomediary Data Solutions

Brown Brothers Harriman (BBH) has announced the next evolution of its data offerings with Infomediary Data Solutions, an expanded set of solutions that brings together data management technology and managed services and is designed to help asset managers and financial institutions take command of their data. Infomediary Data Solutions builds on BBH’s Infomediary data integration...

EVENT

AI in Capital Markets Summit London

The AI in Capital Markets Summit will explore current and emerging trends in AI, the potential of Generative AI and LLMs and how AI can be applied for efficiencies and business value across a number of use cases, in the front and back office of financial institutions. The agenda will explore the risks and challenges of adopting AI and the foundational technologies and data management capabilities that underpin successful deployment.

GUIDE

Regulatory Data Handbook – Fifth Edition

In response to the popularity of the A-Team Regulatory Data Handbook, we have published a fifth edition outlining the essentials of regulations that are likely to have an impact on data and data management at your organisation. New to this edition is a section on RegTech, covering drivers behind the development of innovative regulatory technology,...