by Qontigo
Client Type:
Global Asset Manager
AUM:
USD 1+ trillion
The Need
The client was already familiar with our capabilities, actively using our customizable stress tests to run historical, transitive and factor-specific stresses and the Axioma Multi-Asset Class Risk Model for stress test risk decomposition.
As they were constructing managed high yield strategies, they needed to understand and manage the types of fixed income factors the portfolios were exposed to relative to their benchmarks.
The Challenge
Fixed income factors are notoriously difficult to define and traditional factor-based fixed income models are typically derived from sector or rating weighted-average spread levels and do not have the explanatory power for bond returns, nor the ability to decompose factor exposures into style-based factors. Specifically, the client wanted to know whether they had Duration Times Spread (DTS) factor exposure on the bets they were taking, which is not something all factor-based fixed income models are capable are doing.
The Solution
The Axioma Factor-based Fixed Income Risk Model aligned well with the client’s approach to portfolio construction and risk management. For instance, it has a broad credit market factor that allows them to measure and control their overall DTS exposure and its contribution to overall active risk. They are also able to do this at the detailed sector, country and currency level. Through our model, they could see the unintended exposures to specific style factors on the bets they were taking.
Axioma Products
Axioma Factor-based Fixed Income Risk Model
Powered by Axioma Fixed Income Spread Curves, this cross-sectional factor model provides insights into systematic macro and style factor exposures.
Axioma Risk
Cloud-based, scalable and flexible, you get more joined up market risk management across your entire organization.
