Computerized transaction-based yield curve analytics

• US 20070016509A1
• Filed: 07/15/2005
• Published: 01/18/2007
• Est. Priority Date: 07/15/2005
• Status: Abandoned Application

• Current Assignee: Tradeweb Markets LLC (Tradeweb Markets, Inc.)
• Original Assignee: Tradeweb Markets LLC (Tradeweb Markets, Inc.)
• Inventors: Vogel, Robert
• Application Number:
  US11/182,482
• Publication Number:
  US 20070016509A1
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

A computer aided method for establishing secondary market-relevant price for a bond issued by a corporate entity involves accessing data relating to executed secondary market trades for a bonds issued by the entity, analyzing the data using the computer to select a subset of the information based upon application of at least one specified criterion, and using the subset, establishing an entity specific yield curve for the entity so that, using a bond pricing model, an anticipated price for the bond can be calculated using a point on the established entity specific yield curve that corresponds to the bond.

Claims

1. A computer aided method performed within a trading day for establishing secondary market-relevant price for a bond issued by a corporate entity, the method comprising:

accessing, using a computer, data relating to executed secondary market trades for a group of bonds issued by the entity, the group of bonds comprising at least a first set of bonds having a first maturity date and a second set of bonds having a second maturity date, the executed trades having occurred within a specified time period;

analyzing the data using the computer to select a subset of the information, the selection being based upon application of at least one specified criterion; and

using the subset, establishing an entity specific yield curve for the entity so that, using a bond pricing model, an anticipated price for the bond on the secondary market can be calculated using a point on the established entity specific yield curve that corresponds to the bond.

2. The method of claim 1 wherein the bond pricing model is an OAS-based pricing model.

3. The method of claim 1 wherein the information comprises a stream of reported market transactions.

4. The method of claim 3 wherein the stream of reported market transactions comprises data reported to the NASD pursuant to NASD Rule 6200.

5. The method of claim 1 wherein the information comprises an NASD Trade Reporting and Compliance Engine™

(TRACE) data feed.

6. The method of claim 1 wherein the specified time period is less than the time between the start of a day'"'"'s trading and a then-present time.

7. The method of claim 1 wherein the specified time period is the smallest amount of time necessary to create yield curve data points for at least three different bonds of the entity.

8. The method of claim 1 wherein the specified time period is a moving window of time.

9. The method of claim 1 wherein the specified time period comprises, with respect to a trading day, at least one of:

i) between about trading start time and about mid-morning of the trading day;

ii) between about mid-morning and about mid-day of the trading day;

iii) between about mid-day and about mid-afternoon of the trading day;

or

iv) between about-mid afternoon and late-afternoon of the trading day.

10. The method of claim 1 wherein the establishing the entity specific yield curve for the entity comprises:

for all trades in the subset corresponding to the first maturity date, calculating a median first bond price.

11. The method of claim 10 further comprising, for all trades in the subset corresponding to the second maturity date, calculating a median second bond price.

12. The method of claim 1 wherein the establishing the entity specific yield curve for the entity comprises:

for all trades in the subset corresponding to the first maturity date, calculating a mean first bond price.

13. The method of claim 12 further comprising, for all trades in the subset corresponding to the second maturity date, calculating a mean second bond price.

14. The method of claim 1 wherein the establishing the entity specific yield curve for the entity comprises:

for all trades in the subset corresponding to the first maturity date, calculating a volume weighted average first bond price.

15. The method of claim 14 further comprising, for all trades in the subset corresponding to the second maturity date, calculating a volume weighted average second bond price.

16. The method of claim 1 wherein the establishing the entity specific yield curve for the entity comprises:

fitting a curve to pricing data associated with the subset using a cubic spline interpolation technique.

17. The method of claim 1 wherein the bond for which the anticipated price can be calculated has not traded on the secondary market since a time prior to an immediately preceding trading day.

18. A computer implemented method for establishing a price for a bond of a particular entity, the method comprising, using a programmed processor to:

access data reflecting trades of commercial entity-issued bonds, the data comprising trades of bonds issued by the particular entity;

identify trades specific to bonds of the particular entity;

interpolate a yield curve for the entity based upon applying a cubic spline algorithm to points for each of the traded bonds issued by the particular entity;

identify an MCAA-Yield for the bond for which the price will be established using the yield curve; and

calculate the price for the bond by using the MCAA-Yield and information specific to the bond in an OAS-based bond pricing model.

19. The computer implemented method of claim 18 wherein the bond for which the price is calculated will have not been traded on a secondary market for a specified period of time.

20. The computer implemented method of claim 18 wherein the programmed processor is configured to interpolate the yield curve by a calculation comprising, for each unique bond maturity, the points using at least one of:

a) a volume weighted average;

b) a volume weighted average preceded by exclusion of odd lot trades;

c) a time stamped volume weighted average that gives greater weight to trades having a more recent time stamp;

d) a time window based volume weighted average;

e) an unweighted statiatically based calculation;

f) a tolerance based mean trade level analysis;

g) a time stamped tolerance based mean trade level analysis;

or

h) a time window based, and tolerance based, mean trade level analysis.