Relative value credit strategy depends on the isolation of identical or very similar credit instruments, where one is assessed to be comparatively under- or overvalued. These might be bonds issued by the same borrower but at different points of the yield curve or be bonds issued by different but similar borrowers. For instance, straightforward credit analysis of cash flow and balance sheets of two seemingly similar pharmaceutical firms might reveal that one deserves to be trading at tighter yields than the other, which in turn invites a long/short trade. In essence, the strategy relies on extracting value from dislocation in the pricing of credit risk across markets, instruments and maturities.
This whitepaper explores the challenges of bond analytics and how access to the right analytics can provide opportunities for more comprehensive trading strategies.
Explore key insights including:
• What are the biggest challenges for credit analytics?
• What are bond analytics?
• Bond Analytics for Callable bonds
• Calibrating Credit Curve to Bonds
• Advanced Analytics Required for Convertibles
• The impact of LIBOR replacement on building bond libraries