20 Oct 2011
Altana Fat Tails is an early warning system for increases in the risk of financial institutions, based on CDS spreads. It is being offered by Altana Venture Capital which has received financial backing from hedge fund manager and Altana Wealth founder Lee Robinson
Fat Tails allows subscribers to select which financial institutions they want to monitor from a list of 1,200 entities worldwide. This encompasses sovereigns, corporate and financial institutions located in North America, Europe, Asia, and the emerging markets. Alert events can be based on a tracked entity breaching the user’s chosen CDS spread threshold or falling below a chosen floor, as well as on changes to credit ratings implied by these spreads.
“I have been using CDS spreads for many years as a key early warning system for assessing the risk of particular companies, regions or institutions and this was vital in helping me to predict and hedge against the last financial crisis,” said Robinson, founder and CIO of Altana. “The CDS market comprises a relatively small number of sophisticated investors whose views of an entity’s solvency and expected share price volatility, as expressed in CDS prices, are really worth knowing about. Whilst not perfect, CDS spreads are regarded as the best measure of current and short term outlook of unexpected events, and have proven to do so especially in periods of crisis.”
Fat Tails allows subscribers to select which financial institutions they want to monitor from a list of 1,200 entities worldwide. This encompasses sovereigns, corporate and financial institutions located in North America, Europe, Asia, and the emerging markets. Alert events can be based on a tracked entity breaching the user’s chosen CDS spread threshold or falling below a chosen floor, as well as on changes to credit ratings implied by these spreads.
Robinson added: “Sophisticated traders and investors have known about this tool for years but I have always felt that it is important that we make this available to a wider audience, so that more people can protect their money and their jobs. For anyone in the risk business, particularly treasurers and corporates, this is a vital alert system that can be used to inform decisions about trading with particular companies or regions, or placing money with particular financial institutions."
