PSL provide transparent, independent and justifiable valuations across whole asset classes of structured credit, from liquid RMBS and CLOs, to bespoke significant risk transfer transactions.
Transparent, independent and justifiable valuations across whole assets classes of structured credit.
CLO
RMBS
CMBS
NPL
SRT
Student Loan
Auto
Credit Card
DPR
Private Deals
Evaluated Pricing
We leverage machine learning to calculate market values of thousands of structured credit securities across 32 asset classes every day.
With the platform, you can view your entire portfolio on the web with full access to the metrics that have contributed to your valuations.
For illiquid assets with no direct observations, we provide in-depth metrics as to how the evaluated price has been constructed.
The methodology we use is to satisfy fair value requirements under IFRS 13 and aid prudent valuation work under the IFRS 9 requirement. The AIFMD regulatory environment to adopt independent valuations means asset managers can benefit from our expertise in structured credit.
MARKET
Market observations including bids, asks and trades.
PRICE DATABASE
Millions of historical data points.
CREDIT ASSUMPTIONS
Derive current market assumptions from data and expertise.
PROJECT CASHFLOWS
Convert bond price data to DMs and calculate WAL.
MACHINE LEARNING
Algorithms learn the relationship between risk and DM from market observations
EVALUATED PRICES
Extrapolate DM for everysecurity, including unobserved, based on credit fundamentals and machine learning. Use cash flows to calculate bond price.
Market Data
We receive thousands of market observations directly from dealers, brokers, regulatory reporting channels and data vendors on a daily basis.
These trades, two-way quotes, bids, offers and price talk provide transparency on the global CLO markets and feed into our evaluated pricing algorithms. The data fuels our pricing algorithms which enable us to evaluate prices for both the liquid and illiquid CLOs across the capital structure.
Project Cash Flows
PSL covers the largest global CLO markets – we run daily cash flow projections for each tranche to capture the impact of recent deal performance and market conditions.
PSL continuously monitor a variety of performance metrics throughout a deal’s lifetime, including portfolio weighted average loan price, market value overcollateralization, WARF and % CCC bucket. This enables us to make timely adjustments to our tranche specific assumption sets where necessary.
Machine Learning
PSL identifies the key characteristics behind the value of CLO tranches. We can combine these credit fundamentals into a single Risk Score which allows us to compare CLO tranches with similar risk profiles (e.g. credit rating, weighted average life, market value over-collateralization and tranche leverage) and derive market discount rates for the illiquid space of global CLO markets.
We use machine learning to train the pricing algorithm on market data and can use this to determine the relationship between the credit fundamentals of a tranche and its market discount rate. The model is periodically retrained to capture any changes in market behaviour which allows the model to achieve the best fit between the credit fundamentals and market discount rates.
PSL Risk Score
The Risk Score approach allows us to rank securities by risk in terms of their credit fundamentals. The risk score can be used to determine an appropriate market spread for illiquid securities by interpolating between securities with similar credit fundamentals that have observed market prices.
The influence of market colour on the evaluated discount rate is dependent on the quote type (for example, trades have a greater influence than price talk) and recentness of the observations. This market spread is then applied to the valuation scenario projected cash flows and the evaluated price is determined. By this process we price thousands of CLO tranches multiple times per day.
RELIABLE PRICE CHALLENGE PROCESS
When price challenges occur, we work with our clients in a constructive and prompt manner to come to a solution.
The transparency of our web portal means that the majority of queries can be rationalised directly by clients from viewing the data available.
In situations where this not sufficient, price challenges operate as follows:
1 Email Acknowledgement
Acknowledgement sent by PSL.
2 Analyst Review
Structured credit analyst with technical knowledge of deal structures will review.
3 Deal Features Investigated
E.g. cashflow model, collateral assumptions, call probability.
4 Review of comparable assets
E.g. influence of similar securities.
5 Algorithmic features investigated
E.g. data checked and interpreted from machine learning.
6 Response
On average, detailed response within 24 hours from our structured credit team.
Valuations delivered in the best way for your team.
Desktop
Mobile
API
SFTP
CSV
PSL Depth Score: Confidence and Liquidity
The PSL Depth Score is a metric of each security’s liquidity. It ranges from 10 (the most liquid securities) down to 1 (the least liquid).
The PSL Depth Score is based on various factors including the number of direct and indirect observations, how recent the observations are and how close together observations from different sources are to one another.
PSL Depth Score also helps to select the most liquid securities to create the PSL CLO Indices.
Prudent Valuation
PSL have developed a methodology for prudent valuation across structured credit asset classes.
The aim is to calibrate prudent valuations that represent a 90th percentile confidence interval on the range of plausible market valuations for each security.
The methodology comprises two separate approaches, contingent on the extent of available market data with a view to satisfy market price uncertainty and ultimately Capital Regulation Requirements.
Direct Approach, which is employed for securities that have direct observations from multiple sources.
Indirect Approach, which is employed for securities that have little to no direct market colour.
PSL already deliver prudent valuations to some of the world’s largest investment banks.
For further information, including our white paper:
Arrange a demo
The best way to learn more about PSL and our services is to arrange a demo, either face-to-face or over the internet.
We’ll show you our evaluated pricing platform and bespoke deal modelling tool, and help with any queries and requests you have.