Relative value trading is a popular investment strategy for firms looking to achieve high returns while minimising risk. This whitepaper builds on a previous whitepaper published by Quantifi – Growth of Relative Value Credit Strategies – which explored how an increase in bond issuance, combined with extreme volatility in credit markets, creates attractive opportunities for relative value credit strategies.
This whitepaper explores the challenges of bond analytics and how access to the right analytics can provide opportunities for more comprehensive trading strategies:
The Biggest Challenges for Credit Analytics
Discover why advanced modelling (29%) and consistent relative value (29%) rank as the top obstacles for credit investors. Understand how reliable data and powerful analytics are essential for gaining actionable insights and better portfolio outcomes in the rapidly evolving fixed income landscape.
Essential Bond Analytics
Master the progression from basic yield calculations to sophisticated Z-spread analysis. Learn why Z-spread—a flat spread over the discounting curve that replicates bond price—requires robust IR and credit curve modelling, and how bond equivalent CDS spreads provide consistency with credit markets.
Callable Bond Complexities
Navigate the challenges of bonds with embedded options where maturity is undefined. Understand Options Adjusted Spread (OAS) calculations, from simple short rate models to comprehensive forward rate models, and why two-factor IR credit models with correlated components are essential for accurate pricing.
Credit Curve Calibration Strategies
Learn the critical difference between bootstrapping and multidimensional optimisation when building credit curves from multiple bonds. Discover when each approach works best and why bond maturity concentration can make or break your calibration strategy.
Advanced Analytics for Convertibles
Tackle the most complex instruments with three sources of market risk: interest rate, credit, and equity. Understand why convertibles require sophisticated two-factor models and how to handle the treatment of equity forwards, dividends, and no-default probability assumptions.
Why This Matters for Your Portfolio
Advanced bond analytics separate successful relative value strategies from the rest. Whether you’re trading callable corporates, hybrid fixed-to-floaters, or convertible bonds, having the right analytical framework allows you to:
- Identify mispricing across similar credit instruments
- Execute precise hedging strategies with confidence
- Capture alpha from market dislocations before they disappear
