Hot on the heels of its new evaluated pricing service for the European structured finance marketplace, Standard & Poor’s has struck an exclusive alliance with New York-based Complex Security Valuations Inc. (CSV) to provide valuations for complex, illiquid and hard-to-value securities. The deal will expand both companies’ offerings in the space, and establish a combined product and bespoke pricing facility, with the latter providing clients with direct access to valuations specialists.
The arrangement with CSV will boost S&P’s valuations offerings to include complex instruments, including credit default swaps, interest rate swaps, and credit- and equity-linked notes. Last month, S&P launched its structure finance valuations offering, with coverage of asset- and mortgage-backed securities (Reference Data Review, March 2006).
CSV’s valuation process uses market research, academic papers and industry practitioner journals to reverse-engineer primary market pricing. The company offers audit trails of the assumptions and theoretical underpinnings of its models, giving clients defensible and documented pricing methodologies.
According to Peter Jones, director of European securities evaluations at Standard & Poor’s, Standard & Poor’s will offer the complex security valuations through its bulk feed mechanisms, including the newly expanded MasterFeed. In addition, customers will be able to contact CSV valuations specialists directly to discuss valuations and methodologies.
“This is an on-demand service,” says Jones. “CSV has a extensive library of structures and algorithms and they will look to provide pricing solutions for many different derivative and security types”.
Strategically for Standard & Poor’s, the CSV relationship extends its initiative to offer pricing and valuations for hard-to-price instruments. “There’s no real change of message here,” says Jones. “It’s an extension of our content and capabilities through the asset classes. Our aim through this offering is to focus on niche areas: hard-to-find, illiquid, over-the-counter, complex, hard-to-price securities.”