What Are Credit Derivative Product Companies
(CDPC or Credit
DPC)?
What Are Credit Derivative Product Companies (CDPC or Credit
DPC)?
Credit derivative product companies (CDPCs) are rated special-purpose entities that generate leveraged returns through arbitraging the spreads implied by the CDS market and the historical or expected defaults. The CDPCs have AAA counterparty rating and sell credit protection on single-name credits and super senior credit tranches. These include corporate, sovereign, structured ABS/MBS and highly-rated tranches of collateralized debt obligations (CDOs). These entities typically employ a hold-to-maturity strategy.
CDPCs draw their high counterparty credit strength through diligent compliance with stringent operating guidelines enforced by the rating agencies coupled with a capital model to size their capital adequacy requirements. Principia SFP helps CDPCs to manage key trading and operational processes including deal capture, risk management, compliance reporting and accounting.
Examples of existing and planned CDPCs (manager in italics) include:
- Primus Financial Products, LLC (Primus Guaranty)
- Theta Corp. (Gordian Knot)
- Athilon Capital Corp. (Athilon Structured Insurance Advisors,)
- Aladdin Financial Products LLC (Aladdin Capital Management)
- Channel Capital Plc. (Channel Capital Advisors)
- Cournot Financial Products LLC (Cournot Capital)
- Koch Financial Products, LLC (Koch Financial Corporation/Principal Global Investors)
- Invicta Credit LLC (Invicta Advisors/Babson Capital Managment)
- Newlands Financial Ltd (AXA Investment Management)
- Satago Financial Products Ltd (London Diversified Fund Management)
- Lutece (Natixis Asset Management / SPQR)
- Quadrant Structured Credit Products (Magnetar / Lehman)