Fixed Income Relative Value Analysis, + Website - (Bloomberg Financial) by Doug Huggins & Christian Schaller (Hardcover) (2024)

FAQs

What is relative value analysis in fixed income? ›

Relative value can be defined as expected price convergence of contracts or portfolios with similar risk profiles. For fixed income this means similar exposure to duration, convexity and credit risk. The causes of relative value are limited arbitrage capital and aversion to the risk of persistent divergence.

Fixed-Income Relative-Value Investing (FI-RV) is a hedge fund investment strategy made popular by the failed hedge fund Long-Term Capital Management. FI-RV Investors most commonly exploit interest-rate anomalies in the large, liquid markets of North America, Europe and the Pacific Rim.

The Relative Valuation (RV) function displays how your company compares to its peers. This information can be valuable when determining if your company is being mispriced relative to its competitors.

Relative value trading is an investment strategy in which fund managers attempt to identify and exploit pricing discrepancies among the same or related securities using long and short positions.

Fixed income analysis is the process of determining the value of a debt security based on an assessment of its risk profile, which can include interest rate risk, risk of the issuer failing to repay the debt, market supply and demand for the security, call provisions and macroeconomic considerations affecting its value ...

A fixed-income bond can be valued using a market discount rate, a series of spot rates, or a series of forward rates. A bond yield-to-maturity can be separated into a benchmark and a spread.

Fixed-income investing is generally a conservative strategy where returns are generated from low-risk securities that pay predictable interest. Since the risk is lower, the interest coupon payments are also, usually, lower as well.

The Core Fixed Income strategy employs a multi-sector total return approach, investing exclusively in investment grade securities.

An example of this is that you are occasionally able to simultaneously buy and sell convertible debt instruments along with their underlying stock. In doing this, you are effectively exploiting temporary discrepancies in their valuations. More often, your trades are more speculative.

By harnessing the power of data, news, and analytics, we help organize, understand and bring clarity to a complex world. At Bloomberg, we are guided by four core values that are the foundation of our continued success: innovation, collaboration, customer service and doing the right thing.

What is the difference between relative value and value? ›

This article provides information on commercial real estate absolute value vs. relative value. Absolute value is the value of the property itself based on its future cash flow potential. On the other hand, the relative value is the value of the property relative to other comparable properties.

To compare a security's returns to its benchmark index, major competitors and industry groups, when available, type the company's symbol, then country code, next the EQUITY key, then type COMP, and press the GO key. For the example below, type MSFT US EQUITY COMP GO.

Indicator-Based Directional Trading

This strategy uses an indicator to determine the direction of the trade. The indicator provides a clear signal when it's time to enter or exit a trade, making it easy to work with. Traders who use this strategy can expect to see consistent results and high success rates.

Relative valuation, also referred to as comparable valuation, is a very useful and effective tool in valuing an asset. Relative valuation involves the use of similar, comparable assets in valuing another asset. In the real estate market, relative valuation forms the framework for valuing a piece of real estate.

Relative Value: Asset Valuation Methodology

The relative value of an asset is derived from comparing it to a collection of similar assets, referred to as a “peer group.” If you were attempting to sell your home, you'd likely look into the estimated prices of similar nearby homes in the same neighborhood.

If Company A were trading at 20 times its EPS, the industry average, it would be trading at a price of $40, which is the relative value. In other words, based on the industry average, Company A is trading at a price that is $10 higher than it should be, representing an opportunity to sell.

relative value, of a corporate bond by measuring its yield spread relative to a designated benchmark. This is the spread over the benchmark that gives the yield of the corporate bond. A key measure of relative value of a corporate bond is its swap spread.