UBS Warburg is working on a proprietary credit derivatives model which will allow end users to create baskets of default swaps to achieve tailored levels of risk over the Internet. Alberto Thomas, director in European structured products in London, said the innovation will allow potential investors to play around with specific credits to determine the expected default rate of the basket based on Moody's Investors Service's methodology. The initiative is customer-driven and comes as there is growing demand for rated default swap baskets, said Thomas.
The model should be up and running by the end of the quarter and is being aimed at investors who want to take on synthetic credit exposure, though it will also be helpful for those who are looking at it for hedging purposes, said Thomas.
