Press release, Luxembourg, 18/05/2015
TheMarketsTrust, a Luxembourgish startup innovating in financial risk management, has been accepted into phase 1 of the SME Horizon 2020 program of the European Union to develop a new generation of tools for valuation and credit rating of complex financial instruments known as « Contingent Convertible bonds » (co-co bonds).
Following the 2007-2008 financial crisis, European banks have issued new types of hybrid financial instruments to match regulatory capital requirements. These « co-co bonds » are bonds that are converted into shares if the issuer’s capital falls below set thresholds. Because of their contractual complexity and dependence on the systemic risks in the banking system, valuating these instruments is extremely difficult.
TheMarketsTrust has partnered with Prof. Wim Schoutens of Leuven University (KUL), a pioneer in the modelization of co-co bonds, to develop a new generation of tools for the valuation and credit rating of these financial instruments. Leopard Workstation, a real-time risk analysis platform developed by TheMarketsTrust, will be used as the technological basis for the completion of this project.
In the long term, TheMarketsTrust will integrate other types of financial instruments into the Leopard Workstation platform, in order to offer to investors a real-time risk monitoring of their portfolio. TheMarketsTrust will become a European alternative to existing rating agencies, on which investors are currently too dependent.