Have you recently re-considered your current valuations processes?

Independence

If your current valuations process is not completely independent of front-office you are not following best practice and are liable to challenge


No conflict of interest

Unlike using broker marks or valuations from a separate unit of a broker/dealer we do not have any conflict of interest. We don’t trade in the bonds, we don’t own a position, we didn’t sell you the bond; we are completely independent.


Fully justified rationale

We can provide a commentary detailing and justifying the main factors that lead to our valuation for bonds you may challenge. It means our valuations are transparent and regulators, auditors and investors take a lot more comfort from this approach.


Verifiable rationale

Inputs used for evaluated pricing can be checked against supporting data. We provide a user-friendly challenge process with direct access to the analysts.


Audit trail

We have a comprehensive database of bwic and new issue spreads which provides a good audit trail.


Compliance

Reduce your compliance burden. If your perform the whole valuations process in-house you will be responsible for monitoring conflicts of interest and adherence with methodology and operational procedures.


Improve your governance and control framework

Embed the process of truly independent valuations into your control framework to provide important protections to your investors and minimise your legal liabilities.

A synthesis of market pricing & mark to model

We employ a synthesis of market pricing and mark to model. Wherever possible our pricing is anchored on observable, arm’s length transaction prices in the market.

Liquid securities

Using SCI’s PriceABS service, which contains CLO & ABS trade information from more then 50 sources, we search for trade colour and if any good comps have traded recently. From these trades we back out traded DMs. We mark the bond using these DMs with appropriate adjustments for how long ago the trades were, term structure and DM differences between shelves.


Illiquid securities

A justifiable valuation cannot be reached without a full understanding of the credit and therefore the starting point must be a bottom-up credit evaluation. Even if there has been a recent trade it is imperative to understand the bond well because the market can be extremely thin, leading to bids with wide dispersion. If there is no recent trade, which is often the case, then we mark to model. We perform a dynamic cashflow analysis on the bond using our model; inputs to the model are benchmarked either from the historic performance of the bond e.g. cdrs, cprs etc., or inputs are calibrated to the market e.g. spreads or yields. This mark-to-model approach is augmented with calibration of inputs to the current market where possible.

For illiquid securities there cannot be a reliance on recent trades only; the fundamental valuation above must be performed otherwise the valuation itself will be volatile as trades often take place over time at very different values without the underlying credit having changed. Therefore as the traded price becomes stale, without a fundamental valuation, no basis for future valuations exists.