Algorithmics Incorporated and Citigroup Inc., are teaming up to offer a suite to provide credit risk and default analytics for both listed and unlisted firms and comprehensive coverage across corporate and regional markets.
“The Citigroup models are grounded in many years of research and active credit risk management experience and provide extensive coverage of credit markets internationally,” said Michael Zerbs, president and chief operating officer at Algorithmics. “Making available these market-tested credit models provides our clients with practical tools for enhancing their credit risk measurement and management systems.”
The Citigroup models provide default risk analytics that subscribers to the Algorithmics credit model platform can use in analyzing borrower and counterparty credit quality, assigning internal ratings, and validating internal risk estimates and ratings performance.
The Citigroup model suite includes the hybrid probability of default model for listed corporations and financial institutions, which uses both market and fundamental financial data to quantify default risk. The suite also provides access to market-specific credit risk models, which use financial statement data to calculate probability of default and credit grades on both listed and unlisted firms, and commercial banks.
“This move no doubt responds to a relative lack of commercially available credit models in the market, and the strong need for more advances in this space,” said Debbie Williams, group vice president, Capital Markets and Risk Management with Financial Insights, a financial technology research and advisory firm. “Banks need proven credit models backed by experience and strong data sets, both to use as primary sources of default prediction and to benchmark their own internally-developed models against. This is now a key strategic advantage, and banks that do not use state of the art credit models will find themselves at a distinct disadvantage, both from a pricing and origination perspective, and a portfolio profitability perspective.”