Commerzbank signs up for CDO software

London, 1 August 2005

London-based software vendor CDO2 has signed up Commerzbank as a customer for its structured credit pricing tool CDOSheet. The bank is using the tool within its North American branch, which has an investment book including synthetic CDOs, and will use the product for both CDOs and CDOs-squared.

CDOSheet produces tranche prices, deltas and jump-to-default risk analysis using a semi-analytical model for straight CDOs and Monte Carlo simulation for CDOs-squared. Unlike some other available tools, which work as add-ins to spreadsheets sitting on a single computer, the software is designed to crunch the numbers rapidly by using spare capacity in a grid of computers.

Speed of implementation is also a key selling point for the product. According to CDO2 director and founder Gary Kendall, the company promises to complete implementation of the software within a week, and succeeded in doing so at Commerzbank.

He says one reason for growing interest in the product is that investors face growing pressure to demonstrate that they can price tranches independently, rather than relying on dealers' models. The introduction of the new IAS39 accounting standard for European companies is one key driver of this trend.