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Analytics Products

Axioma Credit Spread Factor Risk Model

Construct investment portfolios with better top-down risk analysis

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.

Key Benefits

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

Proven results

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

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Axioma Credit Spread Factor Risk Model

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