New York -- May 5, 2008 -- Savvysoft, the award-winning derivatives analytics provider, has released a new model for pricing cash flow Collateralized Debt Obligations (CDOs). These instruments are highly complex securitizations with multiple tranches whose payouts depend on the cashflows of an underlying actively managed portfolio of diverse instruments, as well as interest rate swaps and credit default swaps. With the current credit crisis it has become clear that simplistic valuation models which ignore credit concerns are inappropriate for pricing these bonds, and a more sophisticated approach like the one employed by Savvysoft is required for accurate and robust valuations.
An independent model to price CDOs is especially important in the current market environment which has seen CDO values plunge due to high default rates and illiquidity. Savvysoft’s model gives all market participants the ability to mark these instruments to market fairly and accurately.
“Each CDO out there is unique,” said Rich Tanenbaum, Savvysoft founder. “The cash flow waterfall, that is, the way the cash of the underlying portfolio makes its way to the holders of the various tranches, as well as the coverage ratio tests, are very complicated, with lots of gears and levers. The key to Savvysoft’s model is our OmniPricer technology, which gives users the ability to specify the waterfall and the coverage tests in a small Excel spreadsheet, and then embed that logic into the actual model, which doesn’t rely on Excel for calculations. This makes the model fast, robust, and embeddable into larger front middle and back-office systems. It also makes it simple to create a specific model for each CDO out there without reprogramming.”
Savvysoft’s CDO model is available immediately.
Savvysoft, a New York City-based provider of high-caliber OTC derivatives analytics, and portfolio and risk management systems, has been named the #1 ranked Derivatives Analytics vendor four years in a row by Risk Magazine. Savvysoft’s products handle OTC derivatives in every traded market, and are used by thousands of institutions in 15 countries worldwide. These institutions include top-tier banks, dealers, brokers, money managers, energy suppliers, corporate treasurers, auditors and consultants. Savvysoft was founded by Rich Tanenbaum, the head of Derivatives Research at Bankers Trust (now Deutsche Bank). Rich was a founding member of the first OTC derivatives desk on Wall Street at Bankers Trust.
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Contact: LeeAnn Chen (212) 742-8677 leeann@savvysoft.com
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