Objective
In the aftermath of the recent financial crisis, the European Commission and the Regulatory Authorities have placed significant emphasis on Hybrid Securities as a tool to prevent future bail-outs of banks with taxpayers’ money. The banks have reacted to these requirements and the number as well as the diversity of Hybrid Securities issued is increasing rapidly. For example, the total volume of Conditional Convertible Bonds, known as CoCo Bonds, a type of hybrid security, is expected to reach EUR 200 Billion by the end of 2015.
The large majority of financial investors perceive hybrid securities as non-transparent and difficult to risk-manage. For instance, credit ratings from established rating agencies are seen as largely useless for this diverse and very dynamic asset class:
• Doubtful quality, moral hazard embedded in the business model of the rating agencies; and
• Purely backward-looking, always too late to react on important news and market developments.
The Solution
TheMarketsTrust is developing a radically new System for Data Management, Valuation, Risk Measurement and Credit Rating of Hybrid Securities. We are combining, in real-time:
• Advanced quantitative models applied on market data; and
• Algorithmic analysis of news and announcements from the issuers of the securities, the regulatory agencies as well as the financial media.
This results in a range of reliable valuation and risk measures, including ratings, for Hybrid Securities, which we deliver through a Public Subscription Service to the global professional investor community.
For that project, we are supported by the research team of prof. Wim Schoutens, Leuven University (KUL), Belgium. Professor Schoutens is the leading expert in Europe in the area of valuation and risk measurement of Hybrid Securities. He has co-authored several books on the topic and has worked as an independent advisor to Tier 1 banks as well as to the European Commission.
Programme(s)
Funding Scheme
SME-1 - SME instrument phase 1Coordinator
2449 LUXEMBOURG
Luxembourg
The organization defined itself as SME (small and medium-sized enterprise) at the time the Grant Agreement was signed.