Helping fixed income managers achieve alpha

Date: August 27, 2012

An interview with Dario Cintioli, Product Director, StatPro

StatPro recently announced that the company has added 313 new bond pricing functions into StatPro Revolution. Here’s what Dario Cintioli, Product Director, has to say about the newly implemented development.

Q: Expanding bond coverage and risk numbers for bond pricing is a big undertaking that probably had many resources devoted to it. Why did StatPro decide to undertake this behemoth task?

Dario: StatPro strives to exceed client expectations and to make complex calculations, like Fixed Income Attribution, easy. We’re seeing complex strategies such as using interest rate swaps to lock in certain interest rates or hedging out credit risk with a CDS, emerge as new investing norms, as money managers strive to increase gains in today’s volatile markets. Money managers employing such strategies require tools that enable them to see the results of the decisions that they made. And, while having access to such tools is important, even more important is that the data feeding these tools is correct. It’s similar having a car without fuel. We cannot run accurate fixed income analysis without having a price for each instrument. The new pricing functions allow us to calculate the greeks based on a model price and calibrate them to the client price. This pricing is the starting point for the analysis.

Q: It seems like this is going to add quite a bit more to the monthly subscription cost to StatPro Revolution. Will there be a price increase in StatPro Revolution to access this type of coverage?

Dario: These numbers, often prohibitively expensive, are provided for free with every StatPro Revolution subscription.

Q: How does this the expanded coverage help with analysis? What is the overall impact?

Dario: In one word: consistency. StatPro produces all the prices and risk numbers adjusted for all the various stochastic cash-flows of many asset classes, including instruments like callable bonds, CDSs, convertibles, inflation linkers, mortgage-backed security exposed to prepayment risk.

The risk number service is key for our clients because we apply consistent pricing functions and risk factors across all portfolios. Without it, we might need to source these numbers from different places which may or may not capture all the nuances of an instrument (for example, some providers will give us greeks for bonds with optionality without the optionality) and result in flawed analysis. With the incorporation of the bond pricing in StatPro Revolution, the client is confident with the pricing functions and confident that all aspects of an instrument are captured.  They get reliable analysis for nearly every asset class that they invest in.

Q:  How does Fixed Income Attribution work within StatPro Revolution?

Dario: The process is quite simple and straightforward for the client. They need only to submit their portfolio holdings via CSV file into StatPro Revolution and the platform runs the analysis. All aggregate (fund level) fixed income attribution figures are in the Fixed Income tab in StatPro Revolution. Position level and segment level greeks are also provided.

Q: How will money managers benefit?  How will the asset management industry benefit?

Dario: StatPro’s service provides transparency in an age where such a requirement has never been more important. All unique conditions pertaining to an instrument are modeled correctly in StatPro Revolution. This is particularly important for non-vanilla securities (i.e., floating callable bonds).

StatPro Revolution is the first solution that covers all the data needs for such a vast array of asset classes, providing full coverage of fixed income portfolios with minimum hassle at an unbeatable price point. To learn more about this functionality, request a demo.

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