Moody’s Analytics, a leader in credit risk services, today announced the launch of its CDS-implied EDF
™ (expected default frequency) product, available through its CreditEdge Plus™ platform. The new product assists risk managers and investors by leveraging CDS market information to accurately estimate probability of default.
With the release of CDS-implied EDF credit metrics, probability of default measures are now available on entities with CDS contracts, such as sovereigns, local governments, subsidiaries of public firms, and large private companies. “For entities with CDS contracts this new data provides a more reliable probability of default measure than CDS spreads alone, and for publicly listed companies it provides an additional measure of default risk,” says David Hamilton, Senior Director, Quantitative Research at Moody’s Analytics.
“This new probability of default measure is comparable to Moody’s market-leading public firm EDF measures, which are available for more than 30,000 companies globally,” says Douglas Dwyer, Managing Director, Quantitative Research at Moody’s Analytics. “Both objective and forward-looking, these new measures can help risk managers target their resources for risk assessment and mitigation to where they can be most effective,” Dwyer says.
“CDS spreads are often used as a proxy for default risk, yet can markedly distort the probability of an entity defaulting on its debt repayments,” Hamilton says, noting that CDS-implied EDF measures filter out such factors as regional and sector risk premia, loss-given default assumptions and the market price of risk to provide a more accurate gauge of risk.
The new measures can also be incorporated into internal risk ratings systems and required economic capital calculations and loss provisioning levels, and can aid compliance with Basel ll and other regulations.
Moody’s Analytics will be conducting a series of complimentary online webinars, Using the New CDS-Implied EDF™ Measures to Improve Risk Management, as follows:
Americas: October 5, 2:00 pm New York time
Europe: October 5, 2:00 pm London time
Asia Pacific: October 6, 9:00 am Hong Kong time
About Moody’s Analytics
Moody’s Analytics helps capital markets and credit risk management professionals worldwide respond to an evolving marketplace with confidence. The company offers unique tools and best practices for measuring and managing risk through expertise and experience in credit analysis, economic research and financial risk management. By providing leading-edge software, advisory services, and research, including the proprietary analysis of Moody’s Investors Service, Moody’s Analytics integrates and customizes its offerings to address specific business challenges. Moody's Analytics is a subsidiary of Moody's Corporation (NYSE: MCO), which reported revenue of $1.8 billion in 2009, employs approximately 4,000 people worldwide and maintains a presence in 26 countries. Additional information about the company is available at