Excerpt from Don't Mark to Markit: The king of credit indices casts doubt on its own products
by Economist Staff
Intriguingly, Markit agrees with the sceptics, up to a point. The firm is working on a report that will highlight the limitations of the ABX and champion other inputs, such as new issuance and recent trades in similar securities, that can help value credit instruments, "Two years ago we had to tout [the ABX's] virtues. Now people consider it to be more relevant than it should be. They are panicking, over-reacting," says Ben Logan, Markit's head of structured finance. He hears frequent complaints from banks on both sides of the Atlantic saying that their auditors want to see entire portfolios marked to Markit indices.”
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