Some useful info here,

http://www.moodys.com/moodys/cust/content/loadcontent.aspx?source=staticcontent/Free%20Pages/Credit%20Policy%20Research/CreditPolicyCurrentRsrch.htm

including corporate defaults

http://www.moodys.com/cust/content/content.ashx?source=StaticContent/Free%20Pages/Credit%20Policy%20Research/documents/current/2007000000474979.pdf

http://news.bbc.co.uk/1/hi/programmes/newsnight/7506653.stm

They mention the $68 trillion notional - why do people still use this number?

• S&P

http://www2.standardandpoors.com/spf/pdf/fixedincome/Final_CDOEvaluator_Slick.PDF

• Moodys

http://www.moodys.com/cust/content/Content.ashx?source=StaticContent/Free%20Pages/Products%20and%20Services/Downloadable%20Files/cdorom%20overview.pdf

• Fitch

http://www.fitchratings.com/web_content/product/FITCH_Corporate_CDO_Model_2008_Users_Guide_v1.1.pdf

 

 

http://ftalphaville.ft.com/blog/2008/05/21/13198/ft-alphaville-exclusive-moodys-error-gavetopratings-todebtproducts/

"Internal Moody’s documents seen by the FT show that some senior staff within the credit agency knew early in 2007 that products rated the previous year had received top-notch triple A ratings and that, after a computer coding error was corrected, their ratings should have been up to four notches lower."

http://www.ft.com/cms/s/0/09a762ee-2699-11dd-9c95-000077b07658,dwp_uuid=5fd271ee-61f6-11dc-bdf6-0000779fd2ac.html

But is it as simple as a simple bug, or is their method of modelling CPDOs flawed

http://www.noelwatson.com/blog/PermaLink,guid,136d4b18-8d46-4687-8a83-0ef2f97ab805.aspx

http://www.napierscott.com/financialsearch/

Seems that equity derivatives is the new hot area

There seems to have been some confusion between various Markit indices

http://www.markit.com/information/products/category/indices.html

with some saying there is no liquidity in the indices

http://www.ft.com/cms/s/af1e1c18-ee04-11dc-a5c1-0000779fd2ac.html

"Liquidating structured credit instruments requires buying large amounts of protection using credit default swaps. This, in turn, drives the cost of protection higher, potentially triggering a chain reaction."

http://www.portfolio.com/views/blogs/market-movers/2008/03/12/how-the-cds-market-can-support-the-bond-market

"a mark to market problem and, to boot"

I am assuming that they are talking about indices, as structured credit vehicles, such as CDOs tend to hedge against these rather than single name. There are no liquidity problems on the ITRAXX Europe, Xover or HiVol, and I believe the same to be true of the CDX. Furthmore, Markit are still publishing end of day curves, so why is mark to markit a problem?

Perhaps people are getting confused between the credit and the ABX indices?

Probably not, as roll costs are only around 1bp - CPDOs will typically roll into the new index over a 10 day period. Provisional constituents are out from Markit - BAA is on the list

http://www.noelwatson.com/blog/PermaLink,guid,f5c355be-b7ad-4e93-96b1-4dee8b737444.aspx

Some more CPDO documentation...

JPMCPDO.pdf (82.85 KB)

SANDPCPDO.pdf (239.16 KB)

We are now in the strange world of buying protection from a counterparty on a name that has a lower CDS spread than the counterparty - and the counterparty doesn't have to post collateral.

Collateral posting requirements in CDS trades are typically reserved for lower credit quality counterparties in order to ensure payments are made. Because other monoline mortgage insurers – such as MBIA Insurance Corp., Ambac Assurance Corp. and Radian Asset Assurance – are AA and AAA rated, their CDS contracts are unlikely to include the provisions, said the market participant.

http://www.ft.com/cms/s/2/57f389b0-8f0d-11dc-87ee-0000779fd2ac.html

If I were to buy protection on Diageo for 5 years @ 80bps from Bear Stearns which is AAA rated and therefore doesn't have to post collateral, judging by the spreads, there is more chance of the counterparty defaulting than the reference entity.

People are starting to complain about the ABX indices and how the limited number of names mean they indices is being pushed wider than fair value due to short selling

http://www.aleablog.com/dont-mark-to-markit/#comment-828

It will be interesting to see how the CDS indices are affected

http://www.noelwatson.com/blog/PermaLink,guid,f5c355be-b7ad-4e93-96b1-4dee8b737444.aspx

On a Markit related issue, some are unhappy that Markit have a monopoly

http://www.alternet.org/story/74510/?page=entire

http://www.irdonline.com/public/showPage.html?page=331456

http://www.irdonline.com/public/showPage.html?page=339382

As someone who had to work with reference data before red codes I see Markit as a good thing

One thing I forgot to mention about Wim's talk the other evening

http://www.noelwatson.com/blog/PermaLink,guid,136d4b18-8d46-4687-8a83-0ef2f97ab805.aspx

was that he mentioned that conventional Gaussian copula models were starting to throw up some strange number in the current distressed markets. This was discussed in a Bloomberg article yesterday.

http://www.bloomberg.com/apps/news?pid=20601009&sid=aWl_spgXiGIc&refer=bond

The article is written in a rather confusing manner (in my opinion), but what it is saying is that attempting to value certain tranches of the CDX index is proving impossible (correlation greater than one) with the Gaussian model.

There is a discussion on the Wilmott forum

http://www.wilmott.com/messageview.cfm?catid=4&threadid=59608

WimLevyBC.pdf (170.21 KB)

http://www.tavakolistructuredfinance.com/press.html

DISCLAIMER: Work in progress. I used this as a way of testing the performance of C# relative to VBA

TranchePricer.zip (147.79 KB)

Spreadsheet here

http://www.noelwatson.com/blog/PermaLink,guid,297c1bf3-25b8-4d15-913d-41e9b697ce1c.aspx

http://www.nytimes.com/2008/02/17/business/17swap.html?_r=2&hp=&oref=slogin&pagewanted=all

I intended to comment on this, but forgot, and it wasn't until SeekingAlpha mentioned it that I though I'd comment on it

http://seekingalpha.com/article/65104-a-misleading-chart-on-credit-default-swaps

"Market participants worked out an auction system where settlements of Delphi contracts could be made even if the bonds could not be physically delivered. This arrangement was done at just over 36 cents on the dollar; so buyers of protection on Delphi who did not have the bonds received $366.25 for every $1,000 in coverage they had bought. Had they been valuing their Delphi insurance coverage at $1,000 per bond, they would have had to write off that position by $633.75 per $1,000 bond."

There are two problems with this. Firstly as the article points out, noone expects the recovery rate to be zero (unless it has been specified in the contract). Furthermore, it is implied the article implied that the recovery rate is 63%, when in fact BIS say the recovery was 53% (page 46)

http://www.bis.org/publ/qtrpdf/r_qt0606d.pdf

"Under certain circumstances, a shortage of
deliverable debt can drive up the price of such paper beyond the level that
might otherwise be justified by the expected size of repayment. In the case of
Delphi, the settlement price of 63.5% (and an average CDS recovery price of
53.5%) was considerably higher than the settlement prices of other firms from
the same sector or than rating agencies’ estimates of the ultimate recovery
rates on Delphi’s debt."

so, higher than typical 40% assumed recovery rate, but the 40% is a guide not a rule.

A more recent auction - recovery rate was ~40%

http://www.creditfixings.com/information/affiliations/fixings/auctions/cds-2008/cds2.html

http://uk.reuters.com/article/governmentFilingsNews/idUKN1928853020080219

Markit do good daily updates for those that don't already read them

Correction: The recovery rate for the index auction was 63.5, but the average (which would include CDOs where the valuations are performed independently) was 53.5%

http://www.securitization.net/pdf/Nomura/CDO-CDS_20Mar06.pdf

Talked about this last week

http://www.noelwatson.com/blog/PermaLink,guid,d0edfd9e-c0ab-4276-a0b5-d204829bba2a.aspx

I was worried that it would be similar to his previous lecture, but was pleasantly surprised to discover that it had been updated to include recent events.

Probably the most interesting part of the evening was the analysis of the CPDOs. Taking ABN's SURF as an example, the original version of this paid 200bps over LIBOR and was rated AAA by both S&P and Moodys. Wim's argument was that using the Gaussian copula approach does not accurately model fat tail events (the credit markets are shock driven and do not follow a normal distribution), whereas the Levy model gets a lot closer. Using the Levy process would have given a rating of A.

Also discussed were CDO index tranches (ITRAXX Europe and CDX) and how the Gaussian copula gives a base correlation smile (high correlations have to be entered for more senior tranches to get accurate spreads). Using the Levy process gets a much flatter base correlation.

The next few years will be interesting for credit risk modelling. Could it be that we will find a better way to model correlation than using one variable to model the interaction between 125 companies? Will people finally start to move away from using Gaussian models to those that model the tails more accurately? Is it a good time to launch a CPDO now that spreads are historically high?

Some Fitch analysis on the first generation CPDOs

After posting a couple of weeks ago about Wilmott and co working on a new way of valuing CDOs,

http://www.noelwatson.com/blog/PermaLink,guid,b9f877c7-6c00-441b-a520-b933493d2e8d.aspx

it seems that initial work is well underway

http://www.wilmott.com/blogs/paul/index.cfm/2008/2/25/Science-in-Finance-VI-True-Sensitivities-CDOs-and-Correlations

I am going to see if I can get involved in some way

I've ordered these from Amazon

• Credit Derivatives: Life after Copulas

http://www.amazon.co.uk/exec/obidos/ASIN/9812709495

• Credit Derivative Strategies: New Thinking on Managing Risk and Return

http://www.amazon.co.uk/exec/obidos/ASIN/1576601870

In the meantime I am rereading Tavokalis' Collateralized Debt Obligations and Structured Finance

http://www.amazon.co.uk/Collateralized-Debt-Obligations-Structured-Finance/dp/0471462209/ref=sr_1_2?ie=UTF8&s=books&qid=1204044324&sr=1-2

 - the recent subprime events make it worth a revisit!

I've already commented on this,

http://www.noelwatson.com/blog/PermaLink,guid,ca8f0369-3933-4816-a136-b850c306dab1.aspx

but an article in the Independent got me thinking how much the market will be moved in the event of one or more CPDOs unwinding

My initial thoughts were that the unwinding shouldn't move the market a great deal as if this were the case the CPDO would not be a viable product. My reasoning being that if buying large amount of an index moved the market that much, then the twice yearly index rolls, where the CPDOs sell protection on the new series and buy protection on the prior series (to net out their position from the sale six months previous), the costs would be too great. However, looking at the ABN CPDO article

SurfCPDO.pdf (755.98 KB)

they assume a roll cost of only 1bp (see page 29), with no mention of market movements due to large volumes. After some investigation this makes sense. When the CPDO managers trades with a counterparty (typically a flow desk within the same bank as the CPDO structurer) during the roll, the counterparty's net exposure does not change a great deal. They are selling 4.75 year index protection and buying 5.25 year exposure. The index constituents between the two series do not typically change a great deal meaning that the counterparty will not be dramatically changing his risk exposure.

Contrast this with a CPDO unwind where lots of credit protection is sought with no corresponding  buying, and you can see where there may be some trouble ahead. Having said that, it would be good to know how large the CPDO market is in comparison to the amount of Series 8 ITRAXX Europe/CDX issuance to see how large the potential scale of the problem may be - this article thinks $25 billion for CDX and ITRAXX

http://www.reuters.com/article/bondsNews/idUSN2827508620080228

Probably the first article out there where some proper analysis has been undertaken

BarCapCounterparty.pdf (452.09 KB)

and a summary from CreditFlux

http://www.creditflux.com/digest/2008/02/22/barclays+capital+says+cds+counterparty+failure+could+cause+47+billion+of+losses.htm

In summary, BarCap suggest that in the event of a counterparty defaulting, the losses to protection buyers are not as high as the numbers being suggested by others. However, it could be argued that BarCap may be talking up their book!

This article suggest they are

http://www.nytimes.com/2008/02/17/business/17swap.html?_r=2&dlbk&oref=slogin&oref=slogin

"But during the credit market upheaval in August, 14 percent of trades in these contracts were unconfirmed, meaning one of the parties in the resale transaction was unidentified in trade documents and remained unknown 30 days later. In December, that number stood at 13 percent. Because these trades are unregulated, there is no requirement that all parties to a contract be told when it is sold."

But with settlement platforms such as DTCC

http://www.dtcc.com/

having been around for a while, is this still the case. With a large percentage of dealer to dealer trades going over the IDB's (Inter dealer brokers such as Creditex), this stuff being automatically settled, and the majority of the rest of the sell side trades automatically being settled, I'm not sure where the number comes from

http://ftalphaville.ft.com/blog/2008/02/18/10980/credit-markets-beware-cpdos-on-the-cusp-of-forced-deleveraging/

Not exactly unexpected, a number of people were dubious that something rated AAA could return 200bps over risk free asset

http://alephblog.com/2008/02/22/a-small-victory-lap-on-cpdos/

There was also a very good article on Wilmott a while ago. CPDO's sell on the run protection (currently Series 8) and therefore receive a revenue stream. They are typically levered 15X - which starts to become a problem when you are marking to market in a widening market. They operate using a martingale betting system

http://en.wikipedia.org/wiki/Martingale_(betting_system)

but eventually they reach their limits - be it NAV or leverage. 18 months ago when a raft of CPDOs were launched, this glut of protections selling drove index protection down

http://www.noelwatson.com/blog/PermaLink,guid,38888779-0383-42bb-bcbb-f7f2723bc6c1.aspx

Now it appears the opposite may be happening

According to an FT article it does - apparently BAA are trying to avoid being in Series 9 of the index - due to be launched on 20th March

http://www.ft.com/cms/s/0/937f2be0-e031-11dc-8073-0000779fd2ac.html

http://uk.reuters.com/article/UK_SMALLCAPSRPT/idUKL1076761820070910

"Inclusion in the iTraxx Crossover list of mostly junk-rated European companies generally translates into a premium in a company's cost of protection on credit default swaps (CDS), which provide a kind of insurance against non-payment of corporate debt. The premium comes from the higher levels of activity for companies in the index"

Does higher activity equate to a higher spread? If there are more buyers than sellers this would be the case - one example may be when the market is volatile -  people wanting to buy credit protection tend to buy an index as it is a lot easier than buying the underlying constituents. This sends the index spread wider. If the single names didn't widen an arbitrage would now exist

http://www.noelwatson.com/blog/PermaLink,guid,edc5d058-1a2d-4e43-88a4-d58c63a9cb74.aspx

Easier to execute in theory than in practice - in volatile times, the single name spreads widen and liquidity dries up. Looking at the current XOver spread, it is hard to justify the spreads based on current levels of default (last European default was Parmalat). Hence, it could be argued that the underlying constituents have spreads that are too wide.

However, as with equities and banks having a low P/E ratio, we are taking current, not future assumptions - a lot of things could change!

Wim Schoutens is giving a lecture on credit derivatives and Levy processes at 7City next week

http://www.schoutens.be/

http://en.wikipedia.org/wiki/L%C3%A9vy_process

There is already a similar recorded lecture of his on the CQF website, but it will be good to attend in person so I can ask a few questions. If he gives some example code I will modify my work in progress spreadsheet.

http://www.noelwatson.com/blog/PermaLink,guid,b9f877c7-6c00-441b-a520-b933493d2e8d.aspx

Some of Wim's earlier Levy related work

WimExoticOptions2002.pdf (358.25 KB)

http://ftalphaville.ft.com/blog/2008/02/13/10890/systemic-risk-rises-correlation-hits-new-highs/

Not sure that this statement is correct

"That last - in current markets perhaps utterly obvious - point is worth one final tangent. In a way it cuts right to the heart of the whole subprime fiasco. How did CDO tranches get AAA ratings? Because most rating models don’t - or didn’t - have a correlation metric."

Even if it were, the addition of a correlation metric won't necessarily solve all the problems. The one factor Gaussian copula is the most widely used out there and is know to have its limitations. Wilmott and co and working on a new model - I will wait for this before modifying my spreadsheet

http://www.noelwatson.com/blog/PermaLink,guid,297c1bf3-25b8-4d15-913d-41e9b697ce1c.aspx

http://www.ft.com/cms/s/88e590f0-d4f8-11dc-9af1-0000779fd2ac.html

I mentioned this last year

http://www.noelwatson.com/blog/PermaLink,guid,1144b6b7-c207-406a-9d6f-69f9684804b9.aspx

http://www.moneyweek.com/file/41437/credit-default-swaps-how-to-spot-the-riskiest-banks.html

A good article, but with a number of things that I don't agree with. The main argument in the article is that you can compare what the bank has to pay for loans in the market (risk free + CDS spread) compared to what it pays its savers. However, this is not comparing apples with apples

• The CDS spread takes into account recovery rate - typically 40% for senior debt and 20% for subordinated. Taking HBOS which the article states has a 5 year senior spread of 70bps. One could argue why not use the subordinated spread of 130 bps, as if the banks defaults, savers will come in below even the subordinated debt holders.
• Why is the 5 year rate being used - the banks typically only lock you in for one year

http://www.alliance-leicester.co.uk/savings/index.asp?page=esaver&ct=savingshome

Alliance and Leicester 1 year subordinated is currently 310bps

Northern Rock does have a CDS spread - 5Y senior is approx. 250bps

All started by Bill Gross

http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/IO+January+2008.htm

saying that protection sellers may start to struggle if CDS companies start to default. There is around 43bn USD notional CDS outstanding

http://www.bis.org/publ/qtrpdf/r_qa0712.pdf

Even if companies do not start to default, the fact that spreads have started to widen recently indicating that the market is pricing in more defaults happening in future meaning that protection buyers will be asking for more collateral. This is where SCC came unstuck

http://www.ft.com/cms/s/0/5982ae9c-bff9-11dc-8052-0000779fd2ac.html?nclick_check=1

Some further comments here

http://ftalphaville.ft.com/blog/2008/01/14/10132/not-merely-a-subprime-crisis-cds-and-global-financial-meltdown/?source=rss

http://ftalphaville.ft.com/blog/2008/01/11/10099/counterparty-risk-08-edition-for-desking/

http://www.ft.com/cms/s/0/50d659d2-c1f3-11dc-8fba-0000779fd2ac.html

CreditOptionPricingModel.pdf (332.56 KB)

options.pdf (447.53 KB)

I coded this up using logic from Chaplin's excellent book

http://www.amazon.co.uk/Credit-Derivatives-Management-Trading-Investing/dp/047002416X/ref=sr_1_1/026-3520114-3646802?ie=UTF8&s=books&qid=1193910857&sr=8-1

The next step is to get this working in an enterprise application (C#) - this will speed the calculations up dramatically. I will then use real time feeds from brokers such as CreditEx to price in near real time.

Pricerv1.zip (63.47 KB)

Some references that I found useful

References.xls (16 KB)

Guide_to_Exotic_Credit_Derivatives.zip (938.86 KB)

http://ftalphaville.ft.com/blog/2007/07/30/6213/cds-report-its-a-very-brave-man-or-woman-who-calls-the-end-to-this/?source=rss

and one person thinks it may go to 1000bps

http://www.bloomberg.com/apps/news?pid=20601087&sid=a4CHnE.bPy6s&refer=home

I would be very surprised to see it go to this level - the underlying single names are currently trading around 400bps so assuming sufficient liquidity it would be possible to sell index protection and buy the underlying - however, liquidity in single name is nowhere near as high as in indices.

http://www.markit.com/marketing/press_releases.php?date=10Jul2007

A bit late to the market, with both BestQuotes

http://www.bquotes.com/

and my old company QuoteVision

http://www.quotevision.com/Home/index.php

having been around for a few years now. However, Markit will have a USP in that it holds the reference data set so will find it a lot easier to match quotes with entities.

There are 3 types of single name/indices trade

• New Deal
• Assignment
• Unwind

I covered new deals a while ago

http://www.noelwatson.com/blog/PermaLink,guid,90c9c561-95f0-46e5-a7a0-5030cdc07d60.aspx

but the logic is slightly more complex for assignments and unwinds

For single name, we have to use the following logic when calculating accrued coupon

If the original trade date is greater than a month before the last roll, we use the last roll date. If it is less than a month before the last roll date, we take the original trade date

So, taking some example, and assuming the effective date of the trade is 15/06/2007 (i.e. today is 14/06/2007)

• Original trade date is 07/05/2006

Here the trade is after the last roll (20/03/2007), so the accrued is calculated from then - 39 days

• Original trade date is 07/03/2007

The trade is within a month of the next roll date, so we assume a "long coupon" and calculate from original trade date - 100 days

• Original trade date is 07/03/2007

The trade is more than a month before the last roll date, so we calculate from the last roll date - 87 days

Indices are more simple, as you always pay the coupon from the last roll date, and all trades have a fee, as you are buying into a running contract.

I read this yesterday in the Torygraph

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/07/03/bcnitaly103.xml

but it wasn't until today that I had a closer look. Our application was flagging up a negative implied default rate (IDR)(arbitrage opportunity). I put together a spreadsheet to work out where the problem was (attached), and happened to notice that it was the first name that our desk trade that is trading inverted, with the 1Y spread over 100 bps. Note that almost all of the other banks have a 1Y spread of 10bps or less.

Note that I looked at IDR a while ago, but only up to 5 year

http://www.noelwatson.com/blog/PermaLink,guid,fa4d8579-f754-48e0-a485-dc7c6850405f.aspx

http://goldnews.bullionvault.com/files/Investment_Landfill.pdf

I first did this last year

http://www.noelwatson.com/blog/PermaLink,guid,5c54efd9-9b42-480a-bb1a-01386a2c9d48.aspx

but realised that I hadn't got round to updating this when I was looking into a trader's query on DV01 calcs.

Changes include:

• Using maturity date rather than term
• Allowing Notional
• Calculating time to maturity using Actual/360 with effective date being T+1

Tests

1. Maturity 20/9/2012 (5 year trade) - 100bps

Our application gives 4489 (using I.R. of 4.73%)

and BBG gives 4487

 

2. Maturity 20/09/2017 (10 year trade) - 300bps

We get  6503 (using I.R. of 4.82%)

and BBG gets 6540

So we are within 1% of BBG which is adequate

Attached is a spreadsheet that shows how the fair value of an index can be calculated. Points to note

• Recovery rate: Used for DV01 calculation. ITRAXX financial subordinated has 20% recovery constituents, ITRAXX has a mixture of senior (40%) and subordinated, and the rest are all senior
• Weight: Usually same for all constituents in an index unless a merger has taken place (i.e. Intesa Sanpaolo SpA).
• Spread: We linearally interpolate the spread if necesary. With the attached example, the S7 ITraxx 5Y XOver matures in 20/06/2012, so we have 4.75 years until maturity (we calculate from next roll date - 20/09/2007).
• Interest rate: Again, use interpolated interest rate - used for DV01 calcs
• DV01 - discussed here http://www.noelwatson.com/blog/PermaLink,guid,5c54efd9-9b42-480a-bb1a-01386a2c9d48.aspx

Credit derivatives volume still growing

http://www.isda.org/press/press041807ms2006.html

CVC's attempt to buy J Sainsbury appears to be over

http://news.independent.co.uk/business/news/article2442076.ece

with the 5Y CDS spread trading at  ~45 bps, down from its peak of ~130 bps, but still above the spread of ~25bps 6 months ago.

However, as can be seen from the chart below, the share price hasn't decreased by as much. If it mirrored the CDS spread, i would expect it to return to below £5.00.

Two things to note:

• Usually share prices and CDS spreads move in opposite directions - if a company is in trouble the shares go down as the perception is that the company is worth less and the CDS spreads increase because there is more likelihood of default. A leveraged buyout is different. The CDS spreads increase because the buyout will be financed using debt, making the company more risky, and the share price usually increase because the potential bidder tends to offer more than the market value to tempt people to buy into the offer
• In common with several other entities (Nokia being one that springs to mind), Sainsbury does not have any unsecured debt outstanding

http://ftalphaville.ft.com/blog/2007/04/11/3757/cds-report-market-awaits-cvcs-next-move-on-sainsbury/

I used to hold SBRY when it paid a good yield (around 6%) but sold it when the dividend cut was announced. If I were to attempt to make money from my above beliefs, I would either

• Go short on SBRY stock
• If I was worried about a buyout still happening (and assuming I could trade CDS as a private investor), I would buy CDS protection as a hedge.

This has been updated since the last post (note that I tried to update the original post's date but this caused Dasblog to crash - duplicate GUID)

http://www.noelwatson.com/blog/PermaLink,guid,5e315cea-4633-4924-9563-69cbfb3dfb0c.aspx

http://www.markit.com/news/Markit-LCDS-Report.pdf

Markit processed $750 million worth of trades in Q4 2006 compared to the previous quarter - I wonder how much of this increase is due to more people using the Markit platform and how much is due to the market itself growing.

There is an upcoming Loan CDS conference - I might pop along to this

The FTSE dipped below 6000 yesterday

As soon as 6000 was breached it quickly fell another 10 points before recovering later in the day

Even after the last week, FTSE volatility is still historically low (EWMA 5 day window)

Below shows the volatility of the ITRAXX Xover vs. FTSE 100 over the last few months

I haven't plotted the volatility of the main ITRAXX Europe index, but if it remains high, it will be interesting when the CPDO's come to roll on the 20th of this month.

The article below discusses the markets over the last week

http://www.ft.com/cms/s/7be783ec-cb51-11db-b436-000b5df10621.html

Citigroup

CitiGroup.zip (425.37 KB)

Credit Suisse

CreditSuisse.zip (1.23 MB)

JP Morgan

JPMorgan.zip (3.12 MB)

Merrill Part 1

MerrillPart1.zip (2.64 MB)

Merrill Part 2

MerrillPart2.zip (4.9 MB)