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CreditEdge Plus™

The Power of EDF Measures for Credit Risk Assessment and Valuation

To compete in today’s credit markets, risk managers and investors must measure credit risk with precision and speed. CreditEdge Plus™ allows clients to focus resources on the most significant credit problems and opportunities.

CreditEdge Plus™ is a platform that delivers forward-looking daily public firm EDF™ (Expected Default Frequency) credit measures to support credit risk assessment and investment decisions. EDF measures are based on collective, real-time intelligence from global markets that captures the credit insight of the equity markets and combines it with a detailed picture of each company's capital structure. The CreditEdge Plus platform also combines our credit spread valuation framework to provide insight into the dynamics of equity, bond and credit default swap markets for asset management and risk managers.

OVERVIEW
KEY FEATURES
RESEARCH
EDF CASE STUDIES

Comprehensive Coverage

Global coverage of publicly traded firms and entities with CDS quotes ensures you can monitor and manage your portfolio with confidence.

EDF (Expected Default Frequency) measures, CDS-Implied EDF measures, Bond Spreads, CDS Spreads, Fair Value Bond and Fair Value CDS Spreads
Global coverage of over 30,000 publicly listed firms
Over 2,500 entities with daily CDS spreads, including Sovereigns, Supranationals, and subsidiaries of large firms

Flexible Delivery and Reporting Capabilities

Leverage the tools within the CreditEdge™ platform or external delivery mechanisms to integrate the power of CreditEdge Plus™ content into your risk management and investment processes.

Query and Reporting capabilities
Export to Excel for further analysis
FTP Delivery to integrate to internal processes
XML interface to leverage the calculation engine

Powerful Analytic Tools

Gain additional insight into the drivers of credit risk metrics and resulting trends to make more informed credit decisions.

Custom Credit Calculators: Understand the drivers behind changes in default probabilities and credit spreads
Scenario Analysis Tools: Perform stress tests and sensitivity analyses on companies or portfolios
Peer and Relative Analysis Features: Benchmark or determine performance of companies or portfolios vs. predetermined or custom aggregates
Charting Capabilities: Produce graphical representations of portfolio or company level trends and comparative analyses

Reliable Monitoring Capabilities

Timely, reliable, flexible monitoring capabilities are needed to stay ahead of disruptive risk events. CreditEdge Plus™ provides the data and tools needed for daily monitor of your portfolio.

Daily updates to EDF, bond and spread information
Daily notifications on largest movers
Custom Alerts on user-defined parameters

Built from decades of experience utilizing extensive datasets and proven models, EDF measures have been validated on defaults and credit spreads and have become the de facto standard for lenders and investors worldwide.

Validating the Public EDF Model for North American Corporate Firms

How did Moody’s Analytics Public EDFTM (Expected Default Frequency) model for North American corporate firms perform during the last decade? We focus on the model’s ability to differentiate between good and bad firms, its comparison to agency credit ratings, the timeliness of its default prediction, and its accuracy levels.

Banks and their EDF Measures Now and Through the Credit Crisis: Too High, Too Low, or Just About Right?

Financial institutions, particularly banks, were at the heart of the credit crisis and subsequent recession, and defaulted at unprecedented rates. Not surprisingly, the experience has redoubled interest in finding effective ways to provide early warning of credit distress for such entities.

Investing in Corporate Credit Using Quantitative Tools

Corporate credit is an important investment class with potentially attractive returns. The asymmetric nature of corporate bond returns implies that investing in credit is not about picking “winners,” but rather about avoiding “losers” (i.e., defaults and spreads blow-ups). Investors can utilize quantitative measures of credit risk to minimize the risk of such events.

Using EDF Momentum to Provide Insights into Credit Migration and Default Risk

Can momentum, or significant rise or fall of an issuer’s one-year EDF level during a one-year horizon, provide useful information about future credit events and improve the utility of the EDF credit metric for risk managers and investors? We focus on the momentum impact within the EDF credit measure on default risk and ratings changes.

CDS-Implied EDF Credit Measures and Fair-Value Spreads

CDS-implied EDF credit measures and fair-value spreads are powerful tools that risk managers can use to extend coverage of credit risk measures and assess the relative value of various credits. We present a framework that links two commonly used risk metrics: default probabilities and credit spreads.

An Empirical Examination of the Power of Equity Returns vs. EDFs for Corporate Default Prediction

Can relying on equity return information alone yield similar performance to EDFs in default prediction? We find that for 97% of the firms analyzed in our study, equity returns underperform EDFs by large margins as default risk indicators, sometimes even providing signals opposite to realized default rates.

Moody's Capital Markets Research Group EDF case studies are produced on a regular basis and analyze entities recently in the news through the CreditEdge platform.

Greece: Debt Exchange Closes Chapter, but Greek Epic Continues – March 26, 2012
Upon the conclusion of an exchange of EUR 177 billion of Greece’s sovereign debt on March 9, 2012, ISDA declared that the exchange constituted a credit event under the terms of its credit default swaps. The 5-Year Sovereign EDF for Greece shows the long and accelerating road to default.

WYG Plc – March 8, 2012
WYG does not have any credit risk measures like bond or CDS spreads available, and it is not rated by Moody’s Investors Service. However, the public EDF measure is able to capture and quantify changes in the company’s risk of default.

LinkedIn Corp. – March 7, 2012
LinkedIn is an unrated company, and does not have any traded bonds or CDS. However, we can calculate probabilities of default for the company using Moody’s Analytics’ public EDFTM model, which utilizes equity prices and liability information.

Diamond Foods Inc. – February 22, 2012
Following news reports that Diamond Foods made unaccounted payments to its walnut growers in late September 2011, investors raised questions about the validity of Diamond Foods’ earnings reports of USD 680 million and USD 966 million in 2010 and 2011, respectively. The company is being sued by shareholders who claim that the payments may have been used to shift costs from one fiscal year to the other with the intent of artificially inflating its earnings and boosting its stock price.

Olympus Corporation – February 17, 2012
Olympus Corporation is a Japan-based manufacturer of optics, photography and reprography products. In early November 2011, the company admitted a cover-up over nearly two decades of investment losses and the use of several acquisitions to hide the losses. Olympus will hold an extraordinary shareholders meeting on April 20, and by mid-March a new management will be selected to decide on the future direction of the company.

Petroplus Holdings AG – February 2, 2012
Although the financial problems of Petroplus Holdings were well known by investors, the public EDF measure captured and quantified the sudden changes in the company’s risk of default.

Sears Holdings Corporation – January 12, 2012
The trend of Sears Holdings’ pubic EDF measures indicates that the company has been experiencing increasing financial strain and rising risk of default. The company’s public EDF measure has been underperforming its industry sector since 2008, and its EDF measure currently stands above the 90th percentile of its industry, signaling a relatively high risk of default compared to its peers.

AMR Corp. (American Airlines) – December 8, 2011
On November 29, 2011, American filed for Chapter 11 bankruptcy protection with $4 billion in cash, with the intent of financing its restructuring process without external assistance.

MF Global Holdings Ltd. – December 1, 2011
MF Global Holdings’ bankruptcy in October 2011 was unexpected by many investors. However, its public EDF measure signaled that the company was relatively risky versus its industry peers, and gave advance warning of increasing default risk several months in advance of its bankruptcy filing.