Quantitative Credit Strategy

The Fixed Income Quantitative Credit Strategy Group at Credit Suisse develops and uses quantitative models focusing on credit risk at the security and portfolio level. It works with Trading, Sales and external clients. Its remit is, in essence, to work out how to make money out of credit, in various forms, and to integrate analytical techniques into the trading and investment process so as to achieve greater transparency. Clients of the group include real-money accounts, CDO managers, bank loan books, pension funds, and hedge funds.

CUSP® (Credit Underlying Securities Pricing) is a model designed to relate an issuer's capital structure, stock price, and the implied volatility of its shares, to credit risk. CUSP® incorporates this market-priced information to provide investors with forward-looking measures of risk and expected returns in the global credit markets. The latest version, CUSP 2007, is delivered over the LOCuS platform.

PortfolioRisk+ allows credit risk to be measured in portfolios, on a default-only and mark-to-market basis. It uses CUSP to generate the individual P&L distributions for the position, and advanced analytics combine these, incorporating correlation, and also quantify the contribution of this risk from each holding in the portfolio. Uniquely, PortfolioRisk+ also allows structured products such as index options and tranches to be analyzed in the mark-to-market framework

Other models that the group has developed include the APS (Arbitrage Pricing Spread) model for trading the basis risk between bonds, callable bonds and CDS.