Public Sector Credit Solutions, PF2 launch open-source framework

By Tali David

Minneapolis, May 2 - Public Sector Credit Solutions and PF2 Securities Evaluations released an open-source framework for analyzing and rating sovereign, state and municipal bond issuers, according to a press release.

PF2's Public Sector Credit Framework avoids several of the pitfalls facing traditional public finance methodologies used by credit rating agencies, the release said. The framework's approach relies on a multi-year budget simulation that estimates annual default probabilities based on the likelihood of exceeding a user-specified fiscal threshold in any given year. These default probabilities are then converted to ratings.

"Rating agency sovereign and muni bond groups do not take advantage of the power and objectivity of quantitative techniques, leaving their methodologies vulnerable to bias and inconsistency," PF2 consultant Marc Joffe said in the release.

PF2 has posted the software along with sample models for the United States and California at www.publicsectorcredit.org/pscf.html.

Public Sector Credit Solutions is based in San Francisco. New York-based PF2 is an independent consulting firm founded by a group of former Moody's analysts.

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