Thursday, November 27, 2008

Fitch Solutions Offers Liquidity Scores for Credit Derivative Assets

Fitch Ratings-London-27 November 2008: Fitch Solutions has created new liquidity scores and percentile rankings for widely traded credit derivative assets to help banks identify their exposure to the most liquid and least liquid assets, and strengthen their liquidity risk management procedures.

The scores and rankings will provide a unique insight into the liquidity of the CDS market, covering over 3,000 of the most widely traded CDS assets. Each asset is assigned a score, representing the most through to least liquid names, and then given a global percentage ranking according to its liquidity profile against the overall CDS universe.

"Given the market focus on liquidity risk, and recent Basel Committee guidance, understanding the relative liquidity of assets is critical for banks in assessing how they fund their short term liabilities and helping them to meet regulatory commitments," said Thomas Aubrey, Managing Director, Fitch Solutions, London.

"For the first time, risk managers will be able to compare the relative liquidity of assets across regions, sectors and rating bands, as well as having information on the liquidity of an asset and the broader CDS market over time," he added.

This initial launch is open to member banks of Fitch's global pricing services consortium, who provide Fitch with pricing information on a variety structured finance and fixed-income derivative assets. The launch will be extended to buy-side market participants in the new-year.

To accompany today's announcement, Fitch Solutions has published new research on liquidity risk in the credit default swap market which highlights that liquidity does not necessarily worsen as credit quality worsens; that the CDS market has in general become more liquid despite many assets becoming less liquid, and that specific credit events play a key role in determining the liquidity of an asset.

The research, entitled "CDS Market: Overall Liquidity Still Rising Despite Market Stresses" is freely available by logging in at: / "Fitch Solutions" / "Quantitative Research"/ "Topical Research"

1 comment:

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Fitch says, will help banks identify their exposure to the most and least liquid assets, and strengthen their liquidity risk management strategies.

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