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We are always interested in speaking to members of the media on news and events affecting the world of corporate credit risk. We look forward to hearing from you.
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For Immediate Release
[Click Here for Italian Translation]
Breakthrough Risk Assessment Product Brings New Level of Accuracy to Predicting Private Company Default Risk for Italian Companies
Moody?s KMV Launches New Version of RiskCalc in Italy, Expects it to Become a Common Language Among Banks, Financiers and Regulators There
MILAN and SAN FRANCISCO, October 27, 2004 - Moody's KMV, the world?s leading provider of quantitative credit risk measurement and management tools to lenders, investors and corporations, has introduced Version 3.1 of its popular RiskCalc product in Italy. RiskCalc 3.1 incorporates powerful new default prediction technology that provides accurate, forward looking and timely credit-risk assessments of private Italian companies.
RiskCalc 3.1 brings to Italian financial institutions and corporations the only private company default model that combines forward-looking, equity market-based credit cycle predictors with firm-specific financial details to produce updated default probabilities on a monthly basis. RiskCalc v3.1 default probabilities provide a common metric for comparing the risk of private companies, communicating the risk profile of a portfolio with regulators, for characterizing the credit risk of loan portfolios and asset securitization transactions. In addition, in keeping with Moody?s KMV?s commitment to products that both improve profitability and facilitate regulatory compliance, the new model has been designed to meet the requirements of the new Basel Capital Accord based on its transparency, ample documentation and validation testing.
Among the first users of RiskCalc 3.1 Italy will be Rome-based Capitalia. S.P.A. "We improved our performance and profitability using the earlier version of RiskCalc and other Moody?s KMV credit risk management tools, so we were very interested when Moody?s KMV introduced the Italian version of 3.1? said Matteo Arpe, CEO of Capitalia. ?Based on our results so far, we believe it will enhance our ability to anticipate and act upon default risk, thus bringing further improvements to the strides we have already made in managing risk in our portfolios. Moody?s KMV RiskCalc 3.1 model will help banks in Italy and around the world minimize losses and improve their performance.?
RiskCalc v3.1 enables users to originate loans more efficiently (thousands of private companies may be assessed in minutes); model credit risk by country and sector; determine debt terms and breakeven risk-adjusted pricing; identify early warning signals; quantify, in a common framework, true credit risks; and concentrate resources where an institution is most sensitive. Italian financial institutions will use it to rate risk, originate and price loans, allocate capital, and monitor portfolios, all with greater efficiency. Italian corporations will use it to rate risk and to assess the credit-worthiness of their customers and suppliers. The measures can also be incorporated into valuation and portfolio models, improving the precision of credit risk management.
? The RiskCalc 3.1 model is a breakthrough in the way institutions manage credit risk,? says Roger Stein, Managing Director of MKMV. ?By using market-based equity information, the model is not only more accurate than other models, but also provides monthly updating of credit risk for private companies, allowing institutions to more actively manage risks and avoid losses.?
The model?s outputs -- Expected Default Frequencies, or EDFs -- are actual probabilities of default. The model was built on the richest and cleanest private firm default data available, which has been one of the reasons for the accuracy of RiskCalc versus other alternatives. It has also been extensively validated and tested further ensuring the accuracy and usability of the model.
Over 225 institutions worldwide use RiskCalc, with all versions collectively covering some 80 percent of the world?s GDP (97 percent of the developed world?s GDP). In addition to Italy, the new RiskCalc v3.1 models cover industrial firms in France, U.S., Canada, U.K., and Japan. Updates for the other RiskCalc models for European and Asian countries, as well as an updated version of the U.S. bank model, will roll out in coming months. RiskCalc has been used as the basis for over 200 collateralized debt obligations. Moody?s KMV anticipates that the new RiskCalc model will become a common language among those concerned with private company risk assessment and will be warmly received as the secondary market for loans is developing, new levels of regulation are being introduced and bank shareholders are demanding better performance.
About Moody?s KMV
Moody?s KMV, a wholly owned subsidiary of Moody's Corporation, is the world?s leading provider of quantitative credit risk analysis tools to lenders, investors, and corporations. Moody?s KMV's tools provide current default probabilities, recovery estimates, valuations and correlations, and are widely used to assess portfolio risk/return. Serving over 2,000 clients in 80 countries, including most of the world's 100 largest financial institutions, Moody?s KMV maintains the largest and cleanest database of corporate defaults in the world. In addition to its San Francisco headquarters, Moody?s KMV has offices around the world to serve its global customer base.
About Moody's Corporation
Moody's Corporation (NYSE: MCO) is the parent company of Moody's Investors Service, a leading provider of credit ratings, research and analysis covering debt instruments and securities in the global capital markets, and Moody's KMV, the leading provider of market-based quantitative services for banks and investors in credit-sensitive assets serving the world's largest financial institutions. The corporation, which reported revenue of $1.2 billion in 2003, employs approximately 2,300 people worldwide and maintains offices in 18 countries. Further information is available at v2.moodys.com.
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