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

A-Team Insight Blogs

Julius Finance Calls for Standardised House Price Appreciation Scenarios for CDO Valuations

Subscribe to our newsletter

Standardised house price appreciation scenarios should be used in the valuation of complex financial products such as mortgage backed CDOs, according to Julius Finance, CDO valuation technology provider. Peter Cotton, CEO of Julius Finance, explains that a “rigorous approach” is needed to accurately price these products.

Julius Finance provides standardised scenarios for corporate defaults using model fusion technology, says Cotton, who claims that its valuations are the first internally consistent methodology to be deployed in this space.

Cotton explains: “The old saying about the whole being greater than the sum of its parts does not apply to CDOs. For years, banks have been able to tranche up CDOs and sell the slices for more than the cost of the pie – with inconsistent valuation and ratings models not exactly standing in the way. Now, there is the possibility of the entire financial community playing that game on a vast scale with the taxpayer on the other end of the deal.”

Julius Finance’s solution involves a set of agreed standardised scenarios for home price appreciation, combined with detailed loan level modelling of prepayment and default based on millions of historical data points, he says. A precedent is provided by the American Academy of Actuaries, which provides standardised equity return and interest rate scenarios used by insurance companies in the calculation of risk based capital. The procedure ensures that securities cost the same as the sum of the constituent parts, he continues.

“What’s required is a rigorous approach, in the sense that one cannot magically create value by slicing, dicing and rearranging alone. This provides an important constraint on what might otherwise become a free for all,” Cotton concludes.

Subscribe to our newsletter

Related content

WEBINAR

Upcoming Webinar: Generative and Agentic AI in Financial Markets: What the Data Really Shows

Date: 15 October 2026 Time: 10:00am ET / 3:00pm London / 4:00pm CET Duration: 50 minutes Artificial intelligence is reshaping financial markets – but the reality on the ground is more nuanced, more uneven, and more instructive than the headlines suggest. A new A-Team Insight research programme, drawing on responses from senior AI decision-makers at...

BLOG

Testing Industry Perceptions at Data Management Summit London

Every year at the A-Team Group Data Management Summit we take the pulse of the financial data and tech industry on a range of critical topics of the day. We do this through audience participation questions during the day-long event, urging delegates to interact with speakers and other participants via remote voting on salient questions....

EVENT

TradingTech Summit New York

Our TradingTech Summit in New York is aimed at senior-level decision makers in trading technology, electronic execution, trading architecture and offers a day packed with insight from practitioners and from innovative suppliers happy to share their experiences in dealing with the enterprise challenges facing our marketplace.

GUIDE

Regulatory Data Handbook 2026 – Fourteenth Edition

Welcome to the fourteenth edition of A-Team Group’s Regulatory Data Handbook. Supervisors increasingly expect firms to demonstrate which rules apply, which data supports each obligation, who owns the control and how exceptions are identified and resolved. Policies and implementation programmes must now be supported by records that can withstand regulatory scrutiny. This edition examines material...