Powered by proprietary methodologies for defining debt-issuing entities and modeling issuer spread returns, the Axioma Credit Spread Factor Risk Model enables portfolio and risk managers to construct investment portfolios with better control for tracking error and to rigorously manage exposure to market, sector and region factors.
The factor structure delivers superior insight into risk decomposition and performance attribution.
Meaningful risk factors
Portfolio risk and performance attribution are derived from statistically significant factors including market exposure, industry groups, country or region and credit quality
Comprehensive factor coverage
Risk is derived from a global model with market-specific factors estimated for USD IG, USD HY, Euro, Sterling and Yen
Superior specific risk estimation
Granular bond-level specific risk from issuer spread curves are combined with issuer specific risk derived from our parsimonious factor model
Risk differentiation across spread regimes
Beyond Duration Times Spread, risk is further differentiated across quality factors
Model built on issuer spread curves
Factor return estimation is based on the returns of over 9,000 issuer-specific curves
The model has been rigorously tested for statistical significance in explaining the total and active risk of portfolio returns over a wide range of portfolios going back over 17 years