Pricing and Valuation
Loan Pricing Analytics (LPA) is the perfect tool to produce loan valuations. Underlying loan pool of structured products (MBS, ABS, CMO) can be thoroughly assessed in terms of intrinsic value, credit risk and pricing.
Investment banks can use LPA capabilities to discover the value of the loan pool before originating any structured products. The evaluated risk-return characteristics of the loan portfolio will definitely help the issuer properly set up the risk tranches and establish the indicative level of the issue price for the security. LPA can also enable the bank to analyze, simulate and validate the anticipated performance of the structured debt securities. Loan level information is engineered to arrive at portfolio level effects.
Hedge funds and other investors can also use the LPA platform and benefit from the coherent pricing framework. There is an on-going trend of extensive deleveraging in Europe across the banking industry. At the same time, specialist hedge funds see this as an opportunity and buy the loans of overburdened banks. As long as it is a portfolio of retail loans the LPA solution is able to provide investors with a powerful tool to achieve superior risk-adjusted returns.
