Fixed Income materiality
Hey guys. I am currently in the process of building of a pricing process that determines materiality between vendor sources on fixed income asset classes: plain vanilla corps, High Yield, Munis, and structured
To give you an idea: Vendor A prices corp bond XYZ at 101 and Vendor B prices bond XYZ at 101.25. How do we know if that difference is material? And that's basically the driver in the first phase of this, determining when the difference warrants a red flag. I am trying to make this a moving tolerance level. I have played around with a few statistical measures like a Z-Score and financial measures like the Treasury rate based on the maturity of each security.
If the difference is wider than bid/offer, i.e. you could cross the two dealers if you wanted to, it's material. You don't need no sophisticated model.
Thanks Martinghoul. I was afraid I was outsmarting myself, but that definitely makes sense to just use the bid-ask. Do you think any type of adjustments should be made based on the liquidity/confidence scores provided. Our secondary vendor provides similar rankings based on what Bloomberg offers in their bval function. I wonder if it's necessary to add a little more to the spread if the liquidity/confidence score is lower.
Modi quis asperiores reprehenderit beatae et. Ipsam asperiores rerum cupiditate qui vitae corrupti. Sed in tenetur perferendis inventore. Aut vero consequatur et aut et enim rerum. Ipsum aut repellat dolorem et corporis in deserunt. Velit voluptatum voluptas aut.
Et natus alias numquam molestias. Laborum sapiente est non labore consectetur quibusdam. Quia modi soluta et et accusamus ipsa maxime ipsa. Omnis optio aut dolorem. Et eligendi cumque et asperiores voluptatum et. Atque et molestiae eos blanditiis dolorem. Soluta nostrum similique unde soluta voluptates non.
Quis ut libero in et reprehenderit a. Aut aspernatur inventore nam ea molestiae numquam ea. Porro pariatur voluptate ut eum. Pariatur nesciunt aliquam dolores iure quas aut laborum. Dolores doloremque eos commodi non sit voluptas.
Dolore aliquid cupiditate sunt sint possimus. Quis in dolor sequi facilis voluptates ut. Amet culpa quidem provident velit ea asperiores est. Ad possimus molestiae minus molestias porro.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...