ReMATCH, the CDS portfolio rebalancing and market risk mitigation service, has introduced a new service to help its customers reduce their exposure to Quanto CDS risk. ReMATCH report that the service has eliminated over $15billion of Quanto CDS risk for customers, since its launch in September.

Eurozone sovereign CDS contracts tend to be denominated in US dollars to mitigate the strong correlation between the creditworthiness of the Eurozone countries and the embedded currency risk in the event of default. Quanto CDS presents a particular difficulty to trading portfolios because they are denominated in Euro and carry this correlation risk.

Phil Perrott, the designer of the Quanto solution at ReMATCH said: “Managing Quanto risk in today’s volatile environment has become a major concern for banks and their clients. ReMATCH is always looking to offer relevant and timely solutions and we have seen strong interest in this new service."

ReMATCH’s new service aims to help banks reduce their exposure to Quanto risk. It does this using proprietary technology to build accurate mid-level curves and generate risk-reducing trades from the set of portfolio data supplied by participating banks, enabling them to reduce positions that they may otherwise have been unable to exit.