âThe new trade optimization feature, or Trade, makes it easier and faster for portfolio managers to calculate a tradeâs optimal buy/sell amount and improve portfolio performance,â said Vanessa Wu, Managing Director of Portfolio Products at Moodyâs Analytics. Trade allows portfolio managers to identify a target portfolio and specify instruments in a trade, including constraints like max buy, max sell and trade amount. It then computes the optimal holding amount for each instrument in the trade. This optimizes the portfolio's risk/return efficiency as measured by its Sharpe ratio.
The new SME correlation model in RiskFrontier 2.5 is the latest enhancement to Moodyâs Analytics Global Correlation model (GCorr), a diversification model that helps to mitigate concentration risk. The SME model is based on data from the Credit Research Database, Moodyâs industry-leading repository of global financial statements and defaults for non-listed firms. The new model enables firms to more accurately measure the benefits of diversifying SME holdings for firms in the U.S., France and the U.K.
RiskFrontier 2.5 also includes a new Pairwise Correlation Utility that can produce a correlation matrix of pairwise asset correlation, default correlation and/or joint default probability implied by Moodyâs Analytics GCorr model or any user-provided correlation model in RiskFrontier. This new tool helps firms meet the regulatory demand for model transparency and data validation.