Markit, the leading provider of independent data, portfolio valuations and OTC derivatives trade processing, announced today the launch of its enhanced ABX Calculator, designed to aid settlement of ABX index trades.
Markit is the calculation agent for ABX.HE, a widely traded synthetic index of U.S. home equity Asset-Backed Securities (ABS) that has become a closely watched barometer of the health of the ABS markets.
In response to the increased focus on the synthetic ABS market over the last several months, Markit has enhanced its ABX Calculator to allow clients to understand the impact that credit scenarios can have on ABX index trade economics.
Kevin Gould, Executive Vice President and Head of Data Products and Analytics at Markit, said: “Markit’s enhanced ABX Calculator provides clients with the ability to assess the value of their synthetic ABS positions. Given the performance of many of the mortgage pools underlying home equity deals in the ABX indices, it is critical for investors to understand how these credit scenarios will play out in the performance of their index trades, and to measure risk on an ongoing basis.”
The new functionality of the ABX Calculator enables users to input their own
prepayment, delinquency, default and loss assumptions. Enhancements include:
• Ability to add index-level credit assumptions and project cash flows dynamically for each constituent deal underlying the ABX indices. This includes functionality for
determining the Cumulative Default Rate of collateral by including annual collateral
default rates in calculations.
• Ability to input percentage of losses on defaulted collateral and use proprietary
• Ability to run historical scenarios to calculate values for back-dated trades.
These enhancements build on the ABX Calculator’s unique functionality which allows users to agree on a Net Present Value exchange for index trades and to gauge the impact of spread, prepayment and default assumptions on the value of their trades.
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