{"title":"Occam’s Razor for Bond Trade Costs","authors":"Vlad Rashkovich, A. Iogansen","doi":"10.3905/jfi.2021.1.125","DOIUrl":null,"url":null,"abstract":"Inability to accurately project transaction cost is one of the main drags on alpha and performance for bond investors. We introduce a framework for bond trade cost analysis that reflects bond characteristics as well as order information. This framework leverages historical and real-time data to deliver solid explanatory power. The authors goal is to help buy-side traders and dealers to build liquidity trees, while assisting portfolio managers to make investment decisions that include trade costs. We lean on 20 years of experience modeling transaction cost for equities, as well as intimate knowledge of the bond market microstructure. Our work covers investment grade and high yield corporate bonds, issued in USD, EUR, and GBP, as well as government bonds in developed and emerging markets globally.","PeriodicalId":53711,"journal":{"name":"Journal of Fixed Income","volume":"31 1","pages":"79 - 92"},"PeriodicalIF":0.0000,"publicationDate":"2021-11-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Fixed Income","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.3905/jfi.2021.1.125","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 0
Abstract
Inability to accurately project transaction cost is one of the main drags on alpha and performance for bond investors. We introduce a framework for bond trade cost analysis that reflects bond characteristics as well as order information. This framework leverages historical and real-time data to deliver solid explanatory power. The authors goal is to help buy-side traders and dealers to build liquidity trees, while assisting portfolio managers to make investment decisions that include trade costs. We lean on 20 years of experience modeling transaction cost for equities, as well as intimate knowledge of the bond market microstructure. Our work covers investment grade and high yield corporate bonds, issued in USD, EUR, and GBP, as well as government bonds in developed and emerging markets globally.
期刊介绍:
The Journal of Fixed Income (JFI) provides sophisticated analytical research and case studies on bond instruments of all types – investment grade, high-yield, municipals, ABSs and MBSs, and structured products like CDOs and credit derivatives. Industry experts offer detailed models and analysis on fixed income structuring, performance tracking, and risk management. JFI keeps you on the front line of fixed income practices by: •Staying current on the cutting edge of fixed income markets •Managing your bond portfolios more efficiently •Evaluating interest rate strategies and manage interest rate risk •Gaining insights into the risk profile of structured products.