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 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 equity-implied volatility 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+ is Credit Suisse's full-distribution portfolio risk system, allowing credit risk to be measured on a mark-to-market or on a default-only basis.P&L distributions for each position in the portfolio are generated usingCUSP. Using advanced analytics, these are then combined within a correlation framework to provide the forward-looking risk of the portfolio as a whole and the contribution of each holding to the overall risk. Uniquely, PortfolioRisk+ also allows structured products, such as index options and tranches, to be analyzed in the mark-to-market framework.

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

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