Citigroup Unit Adds Default Risk Analysis To Tracking Error Model
SAN FRANCISCO, February 17, 2005 -- Moody’s KMV, the world’s leading provider of quantitative credit risk solutions, today announced that The Yield Book Inc., a unit of Citigroup and purveyor of analytics to the asset management community, has selected Moody’s KMV’s public company default probability measures, known as the Expected Default Frequency (EDF), for incorporation into a new tracking error algorithm.
The new tracking error function within Yield Book will allow asset managers around the globe to calculate and decompose tracking error versus the suite of Citigroup indexes as well as user-defined benchmarks. The incorporation of EDF credit measures extends such analysis to include default risk.
"Many of our customers have become dependent on Moody’s KMV EDF credit measure to better understand the default probability in their individual investments and their portfolios," said Tom Klaffky, CEO of The Yield Book Inc. "We are confident that inclusion of the Moody’s KMV EDF library will significantly improve the Yield Book’s tracking error capability for corporate bond portfolio managers."
Moody’s KMV EDF credit measures are powerful, forward-looking default probabilities. Actual measures of default, they lend themselves to precise decision-making and can be incorporated into valuation and portfolio models. Built from over 15 years of experience with market and fundamental data and modeling, EDF credit measures have been extensively validated on defaults and credit spreads and have become the de facto standard of lenders and investors. Public company EDF credit measures are based on collective real-time intelligence from markets globally and are calculated from three drivers - the market value of a company’s assets, its volatility and its current capital structure. Moody’s KMV EDF credit measures are available for more than 26,000 public companies around the world
"We are delighted that Yield Book has selected us as a key partner for its portfolio analytics software, and are excited about the opportunity to expose a broader range of fixed income asset managers around the world to our market leading corporate credit risk data and analytics," said Andrew Porter, Global Business Development Director for Moody’s KMV.