Fixed-Income Analytics

Basics of Analytical Tools in Fixed-income Space

Analytical tools in the fixed-income domain have evolved alongside the market's growth and technological advancements. Modern fixed-income analytics encompass some of the following tasks:

• Building portfolios.
• Analyzing risks.
• Facilitating trading and settlement.
• Managing cash and collateral.
• Valuing portfolios daily.
• Handling portfolio accounting.
• Meeting regulatory reporting requirements.

Analysts gather pertinent details about their fixed-income holdings, whether they involve derivatives, cash, or underlying bonds. Unique identifiers such as CUSIP or ISIN codes access essential database information, including names, maturities, credit ratings, coupons, and more. This data remains current thanks to real-time updates from live market feeds.

User inputs encompass term structure models, investment timeframes, VaR (Value at Risk) methodologies, historical data, sector preferences, or ESG (Environmental, Social, and Governance) criteria. These inputs establish the foundation of valuation models utilized by analysts. The outcomes of these models generally populate a portfolio summary screen, which displays positions, performance, and other pertinent data to facilitate effective portfolio management.

Question

Which of the following is least likely a unique identifier attached to a fixed-income position?

1. CUSIP.
2. DRIPs.
3. ISIN.

Solution

The correct answer is B.

DRIPs stands for “dividend reinvestment plan,” which refers to the automatic reinvestment of dividends into the issuing shares.

A and C are incorrect. Both a CUSIP number (Committee on Uniform Securities Identification Procedures) and an ISIN (International Securities Identification Number) are distinct identifiers for fixed-income securities. These identifiers aid analysts in swiftly accessing pertinent information about a specific bond.

Reading 22: Fixed Income Active Management: Credit Strategies

Los 22 (k) Describe key inputs, outputs, and considerations in using analytical tools to manage fixed-income portfolios