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We are always interested in speaking to members of the media on news and events affecting the world of corporate credit risk. We look forward to hearing from you.
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For Immediate Release
Moody's KMV Enhances Portfolio Management Product, Allowing Better Portfolio Loss Simulations
New Interface Gives Users Of Portfolio Manager™ Product Access to Loss-Given-Default Data From LossCalc™ Product
SAN FRANCISCO, March 17, 2003 - Moody's KMV today announced a significant enhancement to its Portfolio Manager™ product, adding the power of its LossCalc™ model to the popular analytical tool, which is used to determine the risk and return characteristics of portfolios of corporate liabilities.
LossCalc is a revolutionary product that predicts recovery rates for debt instruments which have defaulted. The product's predictive power is based on estimations of Loss Given Default (LGD) -- the amount a creditor will lose if a borrower defaults -- that are validated against the Moody's KMV proprietary and constantly expanding database of default and recovery information. LossCalc is aimed at commercial banks, insurance companies, corporations and asset managers with corporate credit exposure.
Until now, portfolio managers performing portfolio loss estimates have struggled to arrive at obligation-specific LGD estimates and distributions, using historical averages for the former and default software settings or rules of thumb for the latter. The new Portfolio Manager release solves these problems by delivering on a monthly basis updated obligation-specific LGD estimates and distributions that are sensitive to changing economic conditions.
The product yields forward-looking LGD estimates that are more accurate than those derived from tables of historical averages because they include macroeconomic, industry and firm specific variables in addition to historical recovery rates broken down by debt type and seniority. The LGD parameters are easily set at the obligation level, calculating the individual mean LGD and distribution parameter for each obligation.
"By interfacing LossCalc with Portfolio Manager, we have taken portfolio risk modeling to another level of sophistication and accuracy and significantly broadened the range of simulation applications available to portfolio managers," said Jeff Bohn, Managing Director at Moody's KMV. "This enhancement has been well received in the marketplace. When we released the product in February, nine companies requested access to the product within the first week. We're extremely pleased with these results."
The product release underscores the success Moody's KMV is having in integrating the product lines and databases that were developed separately by KMV and Moody's Risk Management Services prior to their merger last year. "This is a wonderful example of how our combined resources are resulting in enhancing the value and utility of our products and services to our clients," said Dr. Bohn.
Portfolio Manager™ is widely used by portfolio managers in a variety of settings, including institutional investors, asset managers and banks, providing users with guidance for improving their portfolios, on both an overall and asset-by-asset basis. The LossCalc™ model, based on the LGD research that Moody's has conducted and published for more than 10 years, allows investors to estimate projected losses associated with defaulted debt instruments. It employs a proprietary database of more than 1,800 recovery observations, and years of research by Moody's analytics group.
About Moody’s KMV
Moody’s KMV, a wholly owned subsidiary of Moody's Corporation, is the world’s leading provider of quantitative credit risk analysis tools to lenders, investors, and corporations. Moody’s KMV's tools provide current default probabilities, recovery estimates, valuations and correlations, and are widely used to assess portfolio risk/return. Serving over 2,000 clients in 80 countries, including most of the world's 100 largest financial institutions, Moody’s KMV maintains the largest and cleanest database of corporate defaults in the world. In addition to its San Francisco headquarters, Moody’s KMV has offices around the world to serve its global customer base.
About Moody's Corporation
Moody's Corporation (NYSE: MCO) is the parent company of Moody's Investors Service, a leading provider of credit ratings, research and analysis covering debt instruments and securities in the global capital markets, and Moody's KMV, the leading provider of market-based quantitative services for banks and investors in credit-sensitive assets serving the world's largest financial institutions. The corporation, which reported revenue of $1.2 billion in 2003, employs approximately 2,300 people worldwide and maintains offices in 18 countries. Further information is available at www.moodys.com.
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