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Markit Data Guide

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Part Number: 077_106 Date: July 24, 2007

without the prior written permission of Logical Information Machines. 120 North LaSalle Street Suite 2150 Chicago. or transmitted in any form or by any means. Inc. 08/392. IL 60602 Phone: +1 (312) 456-3000 Product names mentioned herein are for identification purposes only and may be trademarks and/or registered trademarks of their respective companies. Inc. Patented May.227-7013. 1995 U. 612 All rights reserved. photocopying. Logical Information Machines. electronic. Inc. While every precaution has been taken in the preparation of this manual. we assume no responsibility for errors or omissions. Neither is any liability assumed for damages resulting from the use of the information contained herein. ® Markit is a registered trademark of Markit Group Limited. No part of this publication may be reproduced. Restricted Rights Legend Use. mechanical. Logical Information Machines. stored in a retrieval system. may revise this publication from time to time without notice.S. Inc. recording.Copyright © 2007 by Logical Information Machines. . duplication. or otherwise. Patent No. or disclosure by the Government is subject to restrictions as set forth in subdivision (c) (1) (ii) of the Rights in Technical Data and Computer Software clause at 252.

........................................................................................................................................................ 6 Consolidated GII Ticker ................ 11 ........................................................................................................................................................................................... Columns ...................................................................................................................................................................................................................................................... 8 Consolidated CUSIP ......................................... 1 Credit Default Swaps ................................MARKIT DATA GUIDE Table of Contents iii Table of Contents Chapter 1: Introduction ................................................................................................. 9 Ticker ............................................................................................................. 2 Trading Idea Research ................... 5 Consolidated Redcode ......................................................... 3 Chapter 2: Credit Default Swap (CDS) Data in the MIM ................... 1 Standard Credit Events (according to the ISDA 2003 agreement) .................................................................................................. 10 Examples ................................................................................... 9 Universal Alias .............................................. 8 Separate CUSIP ............................. 5 Path...................................................................... MIM Symbols..................................... 5 Separate Redcode .......................................................................................................

iv MARKIT DATA GUIDE Table of Contents .

historical data on Credit Default Swaps will be made available in a time-series format in LIM's Market Information Machine (MIM) suitable for analysis alongside other data sets such as debt-issuer price histories. The data set includes rates on swaps denominated in all available currencies. Movements in the stock prices of the debt issuers can be correlated against movements in the credit default risk premium in order to find profitable trades in either based on this analysis. through a partnership between Markit and Logical Information Machines. it has been difficult to track this risk premium with any degree of certainty because the deals are done directly between the purchaser and the seller of the risk protection. The histories of the credit default swap rates can be plotted over time. If the credit default swap rate rises it is an indication that the risk of default of the debt issuer is rising. looking at the amount of debt. or spread with those of other instruments.MARKIT DATA GUIDE Chapter 1: Introduction 1 CHAPTER 1 Introduction Credit Default Swaps Investors in corporate debt instruments have long had to rely on credit agencies such as Moody's and Standard & Poor's to assess the level of risk associated with the debt obligations. Now. A revolution in credit-risk assessment is taking place with the development and growth of an over-thecounter market for a credit derivative known as a Credit Default Swap (CDS). Since this market is an over-the-counter market with no central exchange and no standardized instruments. and then Markit distributes the aggregate. However a London-based company named Markit has become the de-facto collection point for this data. the data will be more even. exchanges. consistent. the balance sheet of the company and its business prospects to determine a credit rating. and easier to extract pertinent information where other spreads may have gaps. Inc. The risk premium that the sellers of protection are willing to take in order to take on the risk of default for the debt issuer can be used as a market-based credit rating for that entity. If for any reason a person wanted to view a . anonymized data back to all the contributors. A CDS allows debt holders to buy protection against the risk of debt default of the debt issuer from counter-parties who are willing to take on that risk in exchange for a periodic premium payment. for the first time. They have arranged deals with the major investment houses doing these sorts of deals whereby information about the deals is sent to Markit. These agencies use teams of analysts to analyze the company from a fundamental point of view. for various protection terms and restructuring clauses. The 5 year spread is the ‘benchmark’ term series because it is the most commonly traded and most liquid of the credit default swap contracts.S. as well as equities that trade on international bourses. As a result. The MIM/Markit data set includes Credit Default Swap data for some ~1800 equities which trade on U.

Therefore special specifications have been made to CDS contracts. This is most common in Asia. These stipulations are necessary in avoiding mismatches in protection because short based assets tend to have higher recovery rates than long based assets. This type of restructuring event is most commonly used in Europe. they are available in the MIM. 15. this contract is coded as MM at the end of the column name as can be seen in this example. and is coded in MIM as CR. and as should be expected. there is no time stipulation as the delivery of an asset of any duration must follow. ● After a Modified Modified Restructuring event (MM) there must be a delivery of an asset with less than 30 months remaining. There are four different types of customized restructuring agreements. ● After a Modified Restructuring credit event. they are all coded into the MIM separately.NYSE SHOW MR: Spread05y_SNRFOR_USD_MR CR: Spread05y_SNRFOR_USD_CR MM: Spread05y_SNRFOR_USD_MM XR: Spread05y_SNRFOR_USD_XR WHEN Date is within 1 year of of of of @ @ @ @ . and 30 year. Standard Credit Events (according to the ISDA 2003 agreement) ● ● ● ● ● ● Bankruptcy Failure to pay affecting a minimum of $1 million Restructuring repayment affecting a minimum of $10 million or in ASIAN and EM markets Obligation acceleration Obligation default Repudiation/Moratorium Restructuring is the most controversial of all these credit events. 2. makes it quite simple: LET @ = GII. This type of restructuring is most common in the US. a query in the MIM. If you would like to graph all these spreads side by side. most notably bankruptcy. 10. 20.F. ● After a Restructuring Credit event.2 MARKIT DATA GUIDE Chapter 1: Introduction different spread. This is coded in MIM as XR. ● No Restructuring occurs when restructuring is not a credit event at all. such as this one. Other Spreads available in the MIM include 6 month and 1. 5. 7. and in the MIM this is coded as MR. the delivery of an asset with less than 60 months remaining must follow. 3. CDS confirmations also specify the credit events. In the MIM. that will trigger a credit event and give rise to payment obligations by the protection seller and delivery obligations by the protection buyer.

an event in the underlying equity. ● Combination moves combining the % move in the CDS contract. have yielded the best results as far as obtaining historically rooted trading ideas for the underlying equity.. the 5 year spread widens while the 7 year or 1 year spread tightens). A day in which the Modified Restructuring 5 year spread becomes smaller. As far as point and click events that are CDS specific there are a few theoretical ideas that have not yet been sufficiently tested: ● When different types of Spreads move in different directions. move in different directions). . In most cases that have been effectively used so far. ● The different time frames of the spreads move in different directions (e. however.e. the same 5 year spread with No Restructuring becomes wider (i. the same spreads with different restructuring rules.g..MARKIT DATA GUIDE Chapter 1: Introduction 3 Trading Idea Research Thus far. and the underlying equity. movements of the credit default swap have been successfully used as events which show promise in predicting future movements of the underlying company’s share price. we have not created any historical trading ideas for trading the actual credit default swaps. in conjunction with a particular event in the CDS (most commonly a percentage move).

4 MARKIT DATA GUIDE Chapter 1: Introduction .

Due to the extensive of number combinations. and by Global Insight for the equity prices.Chapter 2: Credit Default Swap (CDS) Data in the MIM MARKIT DATA GUIDE 5 CHAPTER 2 Credit Default Swap (CDS) Data in the MIM CDS data from Markit is first loaded by a primary key of REDCODE. then. If there exists a tie to a core equity and it can be identified and linked by a CUSIP provided by both Markit for the Redcode. LIM will have an alias ticker in the form GII.Redcode" . Path.. plus any other secondary identifiers (redcode+Tier+Ccy+DocClause) to make a unique key. only those with data are persisted to the MIM.ticker. GII.NYSE ) which contains a certain consolidated subset of columns identified by Spread_ColumnName+Tier+Ccy+DocClause.IBM.exchange (e. MIM Symbols. a Markit unique identifier for an issuing corporate or government entity. Columns Data is provided in the MIM in 6 different value added reference entity formats in the following paths: TopRelation:Credit_Derivatives:Markit Data columns are also provided: ● Separately and completely by: MIM Symbol+Tier+CCy+DocClause ● Spread Columns are Consolidated by: MIM Symbol with Spread_ColumnName+Tier+Ccy+DocClause Consolidated Redcode Markit CDS consolidated columns are defined by: MIM Symbol="MKT.g.

6 MARKIT DATA GUIDE Chapter 2: Credit Default Swap (CDS) Data in the MIM where only Spread_xx columns are consolidated. MKT.001ABC look like this: Separate Redcode Markit CDS columns are defined separately by: MIM Symbol="MKT.Redcode"+Tier+Ccy+DocClause Thus AT&T Corp's many combinations of available swaps are: . Columns for the consolidated MKT.001ABC is AT&T Corp. For the following examples.

001ABC_SNFOR_AUD_CR look like this: .Chapter 2: Credit Default Swap (CDS) Data in the MIM MARKIT DATA GUIDE 7 Columns for the separate MKT.

exchange Consolidated CUSIP Columns for the consolidated CUSIP follow the form: MIM Symbol = CUSIP.cusip+tier+ccy=docclause .8 MARKIT DATA GUIDE Chapter 2: Credit Default Swap (CDS) Data in the MIM Consolidated GII Ticker Columns for the consolidated GII Ticker follow the form: MIM Symbol = GII.ticker.

Ticker Ticker columns follow the form: MIM Symbol = TICKER.ticker.Chapter 2: Credit Default Swap (CDS) Data in the MIM MARKIT DATA GUIDE 9 Separate CUSIP Columns for the separated CUSIP follow the form: MIM Symbol = CUSIP. since Markit provides the CUSIPs.exchange .cusip.

10 MARKIT DATA GUIDE Chapter 2: Credit Default Swap (CDS) Data in the MIM Universal Alias CUSIP. Spread06m_SNRFOR_USD_MR A LET statement can also be used: LET theSec = CUSIP.459200 references the default core price from the GII data and references data from Markit. SHOW 1: Close of CUSIP.ticker.cusip & TICKER.exchange are new universal aliases which can be used in any context when columns of data from different vendors are provided in independent MIM databases allowing for simple identifier use.459200 2: Spread06m_SNRFOR_USD_MR of CUSIP.459200 SHOW 1: Close of theSec 2: Spread06m_SNRFOR_USD_MR of theSec .459200 where: Close of CUSIP.

5400 0.0495 0.2028 NaN -0.5932 4.9182 3.5673 -2.0605 0.NYSE t+3: percent_move from today to 3 values later of WY t+4: percent_move from today to 4 values later of WY t+6: percent_move from today to 6 values later of WY WHEN Date is after 12/12/2006 AND Date is before 2/23/2007 AND 1 value percent_move of Spread06m_SNRFOR_USD_MR of GII. Also on Thursday.1176 2.8506 -2.0567 0. WY closed Friday with a share price of $82.4717 -1.0325 0.3356 0.8460 3.3503 -2. WY had a high of $84.0000 1.7438 Avg AvgPos AvgNeg PctPos 0.0554 0.9%.0357 1. The overall return of the 13 cases is 2.0424 0.0321 0.0863 1.1501 1.25.3356 94.0454 0.0353 2.2789 2.0595 0.0553 0.8829 3.4813 5.5320 1.5% on Thursday.WY.0487 NaN 100.6939 0.1%.4287 -0. but should we expect it to go higher in the near future based on the modified modified credit default swaps huge loss on Thursday.0555 0.2212 88.3523 NaN 0.0649 1.3605 1. Four days from the event WY rallies in all 14 cases by an average of 2.0534 0.7829 NaN 1.28 which was above the 52-week highest high.5571 1.1146 6.7138 0.0324 -3.2353 2.0519 0.4411 0.0465 0.9697 0. WY rallies in 92% of the cases (12 of 13) by an average of 3.1438 -1.4644 0.3880 1.0434 0. in the last year.8460 4.4008 5.0% on Friday after its credit default swap rate spread fell by -10.4991 2.0487 0.6713 2.4188 t+6 6. Question: How has WY performed when.2353 .8705 1. its credit default swap rate spread loses at least -4%? SHOW CDS: Spread06m_SNRFOR_USD_MR of GII.0224 t+4 6.2% relative to the close on the event date.0441 t+3 7.4419 4.9105 88.NYSE less than -4 is Answer: According to the 13 previous occurrences of this event.1105 0.4322 2.8253 3.4059 3.6428 0.7656 3. The average of the 1 decline is -0. WY has shown a strong bullish edge that peaks 6 trading days after the event.WY.0436 0.2925 4.8124 2. Date 12/13/2006 12/15/2006 12/21/2006 01/02/2007 01/08/2007 01/09/2007 01/10/2007 01/12/2007 01/18/2007 01/19/2007 01/23/2007 01/29/2007 02/01/2007 02/08/2007 02/12/2007 02/14/2007 02/15/2007 02/22/2007 Day Wed Fri Thu Tue Mon Tue Wed Fri Thu Fri Tue Mon Thu Thu Mon Wed Thu Thu CDS 0.3319 4.3562 3.7123 4.46%.0503 0.8516 2.Chapter 2: Credit Default Swap (CDS) Data in the MIM MARKIT DATA GUIDE 11 Examples The following shows three XMIM query examples that use the CDS data from Markit: Example 1: Weyerhaeuser Co closed down a 'big' -1.2877 4.2536 5.0538 0.

It should be noted that there is an occurrence of this event which has not peaked yet.0751 1.2397 1.7%.8824 6.NYSE t+3: percent_move from today to 3 values later of HD t+42: percent_move from today to 42 days later of HD WHEN Date is before 2/24/2007 AND Date is after 4/1/2006 AND 1 value percent_move of SPX is less than 0 AND 1 value percent_move of Spread06m_SNRFOR_USD_MR of GII.0324 -3.0175 5. Also as a result of the resent down moves. HD has shown a strong bearish edge that peaks 42 trading days after the event.67%.0220 t+3 -0.0162 11.5400 -1.3451 -14.7%.0863 2.5853 -4.0000 0.2203 5. but above its 200. when S&P 500 and HD close down.7647 7. and 50 day moving averages.7651 5. Question: What has happened HD in the past year.0605 0.0321 0.0001 11.0164 0.HD.6%.5213 -0.12 MARKIT DATA GUIDE Chapter 2: Credit Default Swap (CDS) Data in the MIM PctNeg Maximum Minimum StdDev ZStat Variance 0.0165 0.8506 -2.3356 2. 100.3688 0. Date 04/21/2006 04/25/2006 05/03/2006 05/12/2006 Day Fri Tue Wed Fri CDS 0. the same day that it’s modified restructured credit default rate spread increased by 16.9750 t+42 -9. The most recent move of -0.NYSE more than 1 AND HD is less than 20 value average of HD is Answer: According to the 10 previous occurrences of this event.7647 6. HD had a bearish reversal on Friday. HD declines in 91% of the cases (10 of 11) which does take this most recent occurrence into account.1% relative to the close on the event date. three days from the event.HD. resulting in HD trading below its 20-day moving average on a day in which it’s modified restructuring credit default swap rate spread increases by more than 1%? SHOW CDS: Spread06m_SNRFOR_USD_MR of GII.0500 . The overall return of the 10 cases is -7.4% resulted in a large five day decline of -1. however.6110 5. This effectively makes the edge 82% correct (9 of 11) 42 days from the event.9515 0.7087 -11.0082 5.3914 1. The average of the 1 rally is 4.5829 -8.7189 18 Occurrences Example 2: Home Depot has closed down 8 consecutive days with 4 'large' five day declines.7656 2. HD is trading below its 20 day moving average.0199 0. HD declines in 90% of the cases (9 of 10) by an average of -9. which appears will finish higher than the close on the event date.

39.2998 -8.9885 -0. Is there anything we can extrapolate from these recent moves based on the stock's history? Question: How has DIS performed in the last year when its 5-year credit default rate spread increases on a day in which DIS experiences a 'large' five day decline.0000 -0.0304 0. the same day that it’s modified restructuring Credit Default Spread increased.0241 NaN 100.0660 0.8726 -1. followed by a rally on the next trading day? SHOW CDS: Spread05y_SNRFOR_USD_MR of GII.7560 -8.0273 -0.0241 0.9750 1.0266 0.0048 5.0304 0.2258 -0.DIS.NYSE t+1: percent_move from today to 1 day later of DIS t+3: percent_move from today to 3 days later of DIS t+4: percent_move from today to 4 days later of DIS t+5: percent_move from today to 5 days later of DIS WHEN Date is before 4/1/2007 AND Date is after 3/28/2006 AND 1 value percent_move of DIS is more than 0 AND 1 value ago 5 value percent_move of DIS is less than (30 day average of 5 value percent_move of DIS (1 * 30 day std_dev of 1 value percent_move of DIS ) ) AND 1 value ago 1 value percent_move of Spread05y_SNRFOR_USD_MR of GII.4481 -6.2% resulting in a large five day decline of -2.0283 Avg AvgPos AvgNeg PctPos PctNeg Maximum Minimum StdDev ZStat Variance 0.0697 6.0273 0.7499 6.9541 -7.2998 -14.4066 9.0000 0.3804 -1.6866 -0.9488 11 Occurrences Example 3: Walt Disney Company gapped down -1.DIS.0245 0.3447 -10.0000 0.3908 18.7% on Wednesday. DIS mounted a bit of a comeback on Thursday with a 0.49% rally to finish the trading session with a share price of $34. However.8182 2.9429 -5.4010 3.5606 -1.1599 -4.7974 1.2998 -4.NYSE more than 0 is .2338 -0.1599 -3.0257 0.8941 2.3140 28.1818 81.0909 90.0164 0.4543 -4.9091 6.0500 5.0282 0.Chapter 2: Credit Default Swap (CDS) Data in the MIM MARKIT DATA GUIDE 13 05/22/2006 06/05/2006 06/07/2006 06/23/2006 06/30/2006 12/22/2006 02/23/2007 Mon Mon Wed Fri Fri Fri Fri 0.

6923 1.5121 Avg AvgPos AvgNeg PctPos PctNeg Maximum Minimum StdDev ZStat Variance 0.5071 1.7428 -0.9568 0.0673 1.2692 -0.0000 0.7428 -0.5308 0.2872 0.8301 2.9568 1.1404 t+1 0.4395 1.0818 0.7021 0.7674 1.7827 -0.5411 -1.8822 0.9568 2.6722 -0.4785 -0.1450 1.0381 0.4417 0.0580 -0.2707 1.6724 0.4642 0.2247 0.2734 1.0769 4.5474 1.9177 3.0948 0.1495 NaN 100.2247 0.8224 0.1864 0.2084 0.0580 1.0359 -0.1017 0. DIS rallies in 100% of the cases (8 of 8) by an average of 1.1267 0.2028 1.5255 4.8060 0.6081 0.2% relative to the close on the event date.0465 3.0022 0.2513 -0.4088 0.4929 0.0992 1.2917 61. omitting repeat occurrences within 5 trading days.0304 1.9262 1.14 MARKIT DATA GUIDE Chapter 2: Credit Default Swap (CDS) Data in the MIM Answer: According to the 8 previous occurrences of this event.7270 t+5 -0.9568 2.3154 0.3077 7.5474 92.3245 0.9262 1.9271 0.0580 1.7519 0.1779 0.0438 -0.3434 13 Occurrences .1036 0.0000 0.6519 1.2112 0.5474 0.3504 1. Date 03/29/2006 05/23/2006 06/14/2006 07/19/2006 08/10/2006 11/15/2006 11/28/2006 12/18/2006 01/08/2007 01/29/2007 02/28/2007 03/14/2007 03/29/2007 Day Wed Tue Wed Wed Thu Wed Tue Mon Mon Mon Wed Wed Thu CDS 0.3077 7.1258 0.9830 -0.2012 0.5385 38.9231 23.5411 t+4 0.1673 -0.0948 0.1795 0.1163 t+3 0.4203 0.1449 1.6764 1.8760 1.2977 1.1168 0.6923 2.9515 -1.1958 0.9568 92.1495 0.1168 0.7119 -0.1318 -0.4615 1.5336 0.3759 0.2692 1.0039 1.3259 0. DIS has shown a very strong bullish edge that peaks 4 trading days after the event.1460 0.4358 76.8471 -1.6629 0.5071 0.