Financial Research Company

 Own model, database  Improve portfolio performance  Quantitative method

Background Providing services since 1975 Providing services since 1975 Risk management technology and decision support tools and products Risk management technology and decision support tools and products

Research + Indexes S&P / Barra Indexes Pioneered by William Sharpe Eugene Fama Kenneth French

 Index NameSymbol  Index NameSymbol  S&P/Barra 500 Value^SVX  S&P/Barra 500 Value^SVX  S&P/Barra 500 Growth^SGX  S&P/Barra 500 Growth^SGX  S&P/Barra MidCap 400 Value ^MUV  S&P/Barra MidCap 400 Value ^MUV  S&P/Barra MidCap 400 Growth^MGD  S&P/Barra MidCap 400 Growth^MGD  S&P/Barra SmallCap 600 Value^CVK  S&P/Barra SmallCap 600 Value^CVK  S&P/Barra SmallCap 600 Growth^CKG

Book-to-price ratio HIGH B/P (Value Index) LOW B/P (Growth Index) S&P

Outgrowth of research Fama and French – combination of B/P ratios and market capitalization explain much of the cross-sectional variability in average stock returns over period from 1963 to 1990

Other benefits Book to price ratio tend to be more stable over others (P/E ratio, historical earnings growth rates, ROE)

MKMV Background  Acquired by Moody ’ s Corporation & merged with its Moody ’ s risk management services subsidiary in 2002 April.  Headquartered in San Francisco  Now we just simple call that “ MKMV ”

Products Credit Monitor - Windows-based desktop software package CreditEdge - Designed for those actively transacting in the markets EDFWatch - market-based probability that shows a firm will default over a specified period of time Credit risk

Credit Risk / Default Risk  The possibility that a bond issuer will default, i.e. fail to repay principle and interest in a timely manner.

EDF  Probability that a firm will default over a specified period of time  Three Keys that determine a firm ’ s EDF credit measure: 1. The current market value of the firm (market value of assets) 2. The level of the firm ’ s obligations (default point) 3. The vulnerability of the market value to large changes (asset volatility)

What other else besides Credit risk?

Products Risk Calc PDs - Probability of Default

Portfolio management  Credit risk for entire portfolio  Portfolio risk and return is driven by the connection between changes in default risk and changes in credit spreads