M2M MATRIX is a solution for helping institutions produce ‘fair values’ for un-priced, complex or illiquid bonds and similar instruments.

It delivers daily spread information based on regularly priced liquid instruments. The information supplied enables the user to discover the price of any illiquid bond that is covered by the currencies, ratings, domicile, maturities and sectors by reference to the appropriate matrix.

Data is supplied to the user in the form of spread information calculated against an appropriate "risk free" rate, that is, a Government Bond rate.

To reflect the degree of illiquidity of the instrument a ‘liquidity factor’ is applied which can be either supplied by us or by the user. Our liquidity factors are derived from market sources for particular types and forms of illiquid assets.

Our solution has been designed to help banks and other institutions cope with the changing regulatory environment and produce more accurate daily ‘fair valuations’ on those products which have historically been, and continue to be, the most difficult to obtain regular and reliable information.

The information can be used for a variety of purposes and not just producing a fair market valuation of illiquid instruments. For example, it could be used to validate prices of all bonds in a portfolio, both liquid and illiquid. It can be used as a constituent in the pricing of convertibles, mortgage backed bonds and a variety of other types of instruments. By retaining the daily data, it can be used in conjunction with credit risk information to provide a better insight into market sentiment and probability of default.

The Matrix will assist institutions in complying with the requirements of IAS39 and also assist in minimising capital requirements under Basel II. It will enable institutions to comply with local regulatory rules, e.g. MaH rules under German regulations. It will enable Risk Managers to monitor investment portfolios as though they were traded instruments and produce realistic assessments of the performance of such investments.

It can also enable users to apply this information to loan or private placement portfolios as well as public issues. This, in turn, can be used to validate or even calculate reasonable provisions on the loan book and, in turn, be developed to assist in modeling capital usage and return calculations.

The backbone of the M2M Matrix is currently available market data for liquid instruments. This is not a mere sampling of a small selection of bonds fitting a pre-defined rating, currency or time bucket (as in other systems) but a very large sample taken from across the market sector as a whole. We take as much up-to-date information as possible from available market sources on all sectors of the bond market, ensuring that such data is for liquid and actively traded debt instruments. 

We are constantly updating and revising the number of matrices available enabling the user to more accurately reflect the combination of factors that a bond may have.