Fitch Formally Launches Default VECTOR Model Version 3.0.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of & LONDON -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has formally released an updated version of its Default VECTOR Model. The VECTOR 3.0 model's launch is the culmination of extensive testing, an initial beta release See beta version. in August, and a market comment period. VECTOR 3.0 replaces version 2.2. Fitch is also releasing an updated Global Rating Criteria for Collateralized Debt Obligations Collateralized Debt Obligation (CDO) A general inclusive term which covers Collateralized Bond Obligations, Collateralized Loan Obligations, and Collateralized Mortgage Obligations, to coincide with VECTOR 3.0's debut. Two separate updated reports addressing the unique criteria for the rating of Cashflow and Credit Derivatives CDO (Collaborative Data Objects) A programming interface from Microsoft for accessing MAPI-based e-mail, calendaring and scheduling servers. Originally called "OLE Messaging" and "Active Messaging," CDO wraps the Enhanced MAPI library into a COM object that provides the portfolios are also set for release soon. Fitch's fundamental credit view for the CDO sector has not changed. VECTOR 3.0 incorporates several updated assumptions with respect to asset default probabilities, recovery rates, and correlation. In addition, the new model includes an updated framework for emerging markets and provides a more user-friendly interface with the introduction of a Reference Entity Feed (REF). Methodological and Analytical Changes Adjustments have been made to default probability assumptions in order to increase the integrity of the default probability curves and to create a smoother progression of default probabilities over time. For lower-rated assets, the default assumptions have been slightly front-loaded, while for more highly rated assets, the default probabilities have been slightly back-loaded. It is important to note that the overall 10-year default probability assumptions have not changed. VECTOR 3.0 incorporates updated recovery rate assumptions in several areas such as European corporate debt as well as certain structured finance asset types. In addition, the update includes a more flexible functionality to treat asset specific recovery rates. The agency will use this functionality to incorporate recovery estimates based on its corporate asset Recovery Ratings in collateralized loan obligations Collateralized loan obligation (CLO) A security backed by a pool of commercial or personal loans , structured so that there are several classes of bondholders with varying maturities, called tranches. Similar in structure to Collateralized Mortgage Obligations. ("CLOs"), where appropriate. Correlation changes in VECTOR 3.0 only affect CMBS CMBS See: Commercial Mortgage Backed Securities , where inter and intra industry correlations are reduced to 75% of their VECTOR 2.2 levels to recognize the more idiosyncratic id·i·o·syn·cra·sy n. pl. id·i·o·syn·cra·sies 1. A structural or behavioral characteristic peculiar to an individual or group. 2. A physiological or temperamental peculiarity. 3. property type, geographic and other correlation factors, present in CMBS in comparison to other structured finance securities. The new version also includes a revised framework for the analysis of emerging market assets in internationally rated deals. The approach puts greater weight on regional and country concentrations when determining asset correlation, rather than on industry concentrations. Greater User-Friendliness VECTOR 3.0 offers appropriate interfaces and user-friendly tools to provide market participants with ease of access to working with Fitch's models. Fitch is providing the Fitch Reference Entity Feed ("REF") as a simple and powerful solution for synthetic CDO structures. It allows users to model portfolios with accurate and complete information. The use of Fitch data guarantees a high level of integrity including up-to-date ratings information and other essential securities detail that can be input into VECTOR 3.0. The Global Rating Criteria for Collateralized Debt Obligations provides details on these new features and is available for download at www.fitchratings.com. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion