While some things have changed significantly over the past two decades across the capital markets, others have ostensibly remained the same.
Take, for example, the challenge facing capital markets firms when calculating fair valuations for the securities they hold. In the equities world, things are relatively simple—of the approximately 6,000–10,000 equities constituting the investable universe, all are exchange-traded and therefore have observable prices.
But when it comes to the world of fixed income, where the investable universe is appreciably larger—in the region of 2 to 5 million instruments (depending on the source) — and significantly more complex, things get a little tricky.
Not only are the majority of fixed income instruments traded over the counter, they also tend to trade sporadically.