Abstract: A computer-implemented method for automatic defeasance of a base portfolio of swaps, the base portfolio being held between a first counterpart and a second counterpart, including the steps of: receiving at a portfolio database trade data related to the base portfolio; identifying from the trade data at a matching engine trades that have at least one of matching core attributes and matching trade characteristics so as to compile the base portfolio; grouping at a sub-portfolio generator the identified trades into sub-portfolios; determining at a spread value engine a set of allowable spread values for each sub-portfolio; and for each sub-portfolio, generating at a defeasance portfolio engine a defeasance portfolio of swaps comprising at the most two trades, each of the two trades having a spread value selected from the determined set of allowable spread values so that the defeasance portfolio replicates the base portfolio and minimizes gross notional of the defeasance portfolio.

Abstract: A computer-implemented method for automatic defeasance of a base portfolio of swaps, the base portfolio being held between a first counterpart and a second counterpart, including the steps of: receiving at a portfolio database trade data related to the base portfolio; identifying from the trade data at a matching engine trades that have at least one of matching core attributes and matching trade characteristics so as to compile the base portfolio; grouping at a sub-portfolio generator the identified trades into sub-portfolios; determining at a spread value engine a set of allowable spread values for each sub-portfolio; and for each sub-portfolio, generating at a defeasance portfolio engine a defeasance portfolio of swaps comprising at the most two trades, each of the two trades having a spread value selected from the determined set of allowable spread values so that the defeasance portfolio replicates the base portfolio and minimizes gross notional of the defeasance portfolio.

Abstract: A computer-implemented method for automatic defeasance of a base portfolio of credit default swaps, the base portfolio being held between a first counterpart and a second counterpart, including the steps of: receiving at a portfolio database trade data related to the base portfolio; identifying from the trade data at a matching engine trades that have at least one of matching core attributes and matching trade characteristics so as to compile the base portfolio; grouping at a sub-portfolio generator the identified trades into sub-portfolios; determining at a spread value engine a set of allowable spread values for each sub-portfolio; and for each sub-portfolio, generating at a defeasance portfolio engine a defeasance portfolio of credit default swaps comprising at the most two trades, each of the two trades having a spread value selected from the determined set of allowable spread values so that the defeasance portfolio replicates the base portfolio and minimizes gross notional of the defeasance portfolio.

Abstract: A computer-implemented method for automatic defeasance of a base portfolio of credit default swaps, the base portfolio being held between a first counterpart and a second counterpart, including the steps of: receiving at a portfolio database trade data related to the base portfolio; identifying from the trade data at a matching engine trades that have at least one of matching core attributes and matching trade characteristics so as to compile the base portfolio; grouping at a sub-portfolio generator the identified trades into sub-portfolios; determining at a spread value engine a set of allowable spread values for each sub-portfolio; and for each sub-portfolio, generating at a defeasance portfolio engine a defeasance portfolio of credit default swaps comprising at the most two trades, each of the two trades having a spread value selected from the determined set of allowable spread values so that the defeasance portfolio replicates the base portfolio and minimizes gross notional of the defeasance portfolio.

Abstract: Using observable market factors which reflect a current share price, a given share price, volatility in given share price, expected debt recovery fraction, and percentage standard deviation in the expected debt recovery fraction, the instant invention provides probability estimates for no default by a company within a given future time horizon. The invention has applications in the field of bond and company rating and calculation of credit spreads. The invention also provides a relationship between credit spreads, equity prices and volatility, useful as a price discovery tool in determining fair market price of the credit risk, on a name basis for credits that have public equity.