RiskVal has added credit default swap (CDS) conversion analytics to its portfolio valuation solution with a view to helping its customers move to the new credit derivatives standards. The vendor indicates that for a limited time, it will be offering a free service to help these firms convert legacy CDS portfolios to the new standards by the 8 April deadline.
Jordan Hu, CEO and founder of RiskVal, explains that the ‘re-coupon’ service is to help the vendor’s customers adjust to the “CDS big bang”. Portfolios sent in for analysis will have each position returned re-couponed into 100 and 500bps fixed coupon standard CDS contracts, maintaining risk profiles, payment schedule and present value. According to the vendor, this analysis offers clients a first look at how their portfolios may be exposed to the benefits of greater trade compression as part of the move to standardised CDS premium payments.
RiskVal’s Portfolio Valuation team will assume each position’s notional is $1MM. The newly converted portfolios will match notional with the original CDS positions. Optionally, clients that provide notional will be able to view notional aggregated maturity buckets. The weighted average coupon will result in the same cash flow schedule, with a coupon effective date as of the last IMM maturity date. Risk profiles of the old and new positions will be identical. Coupon cash accruals in the old positions may need to be settled with counterparties independently.
Hu comments: “In these interesting times for credit derivative trading, we are here to help move the industry forward to CDS standardisation.”