Industry Open-Sources Model For Infamous CDS
GlobalEcho writes “Credit default swaps (CDS) are infamous for bringing down AIG and requiring a bailout of hundreds of billions of dollars. Because the market for these was so murky, the US government has insisted that Wall Street create a clearinghouse for these contracts. In a fresh twist, part of the deal is that the models used to price CDS have been standardized, and that the pricing code was made open source, under a somewhat BSD-like license. The source code (originally written by JPMorgan) provides the basic pricing routines, plus an Excel interface. To my knowledge this is the first significant migration of an investment bank product platform from its usual super-secret proprietary home to the rest of the world.”
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