NEW YORK (HedgeWorld.com)–A partnership between creditex Inc. and Gimme Credit has resulted in a new company, Credit Derivatives Research LLC, which was set up to provide credit derivatives analysis and research.
In the process of being launched, the new company will provide data such as risk ratings, market and industry indicators and indexes on credit derivatives. Credit Derivatives Research will use the credit derivatives expertise and data of creditex and the research approach of Gimme Credit, which focuses on corporate credit.
According to creditex President and Chief Operating Officer Andrea Danese, the credit derivatives market has been growing very fast. “We are talking about a market that in 1996 was US$200 billion and is now US$3 trillion,” he said.
The growth has been driven in recent years by the creation of specific credit derivatives trading desks at banks. Major corporate bankruptcies and other credit events also have helped. The market itself is over the counter, and data has not been made widely available although many software providers such as Credit Derivatives Research want to bridge the gap. Monis recently upgraded its software offering, Convertibles XL, to enhance the credit default swap pricing models available to clients Previous HedgeWorld Story.
The credit default swap market is expected only to grow more as the Bank for International Settlements directive takes effect in 2006, requiring that investment banks and companies need to use specific tools to handle risk management. Hedge funds in particular will be using credit derivatives more in the future, too, as some bond and equity hedge funds view credit default swaps as an indicator of market risk in addition to being an investment opportunity, according to Mr. Danese.
“Our aim is to create a company that can become an aggregator of data on this market,” Mr. Danese said.
The new company will be based in New York and will be supported jointly by creditex and Gimme Credit with financial support Research Partners Ltd., a New York-based investment and marketing firm. Research Partners was involved in financing Gimme Credit Publications and other market data providers.
Arthur Rosenzweig, managing director of Gimme Credit, will be managing Credits Derivatives Research and hiring a management team of managers and analysts from Gimme Credit and creditex. Lori Gottlieb, who will lead the research and product development effort, will join Mr. Rosenzwieg. She was senior vice president of derivatives sales and product management at Donaldson, Lufkin & Jenrette.
The initial focus at the company will be to market creditex’s global data service called PriceTracker. PriceTracker has credit default swap prices on more than 1,600 reference entities. The system lets users find the latest default swap price on a company and search by rating, sector and region. The software differs from others on the market, in that it gives their clients the price determined by a survey of those active in the market rather than actual market prices, Mr. Danese said.
Credit Derivatives Research plans soon to complete new research products and services that are currently under development at Gimme Credit and creditex, according to a joint company announcement.