{"id":150902,"date":"2024-02-05T14:18:14","date_gmt":"2024-02-05T14:18:14","guid":{"rendered":"https:\/\/www.quoniam.com\/article\/award-top-fund-manager-copy\/"},"modified":"2025-08-29T08:34:01","modified_gmt":"2025-08-29T08:34:01","slug":"incorporating-pre-trade-bond-liquidity-data","status":"publish","type":"post","link":"https:\/\/www.quoniam.com\/en\/article\/incorporating-pre-trade-bond-liquidity-data\/","title":{"rendered":"Incorporating pre-trade bond liquidity data into corporate bond management"},"content":{"rendered":"\n<div class=\"wp-block-group is-style-smallBG\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<p class=\"wp-block-paragraph\">Quoniam authors Dr Harald Henke, Max Geilen and Tobias Stein, CFA have analysed the value of liquidity information in the management of corporate bond portfolios and how pre-trade information can help obtain better liquidity, tradability, and transaction cost estimates.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Navigating liquidity in the corporate bond market is a challenge for credit managers. Contrary to the equity market, most trading in bonds does not take place on regulated exchanges but in over-the counter (OTC) markets, where buyers of a bond need to find a willing seller and no publicly available limit order book exists. Therefore, investors must identify the existing liquidity in corporate bonds and leapfrog other investors when trading on liquidity.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This study uses sell-side pre-trade information to analyse its effect on the construction process of corporate bond portfolios. In the first section of the paper, we cover liquidity in the corporate bond market in greater detail. Subsequently, we describe the pre-data we use and show their impact on identifying liquidity, tradability, transaction costs, and performance before concluding the paper.<\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-group alignfull has-color-grey-light-background-color has-background\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n\n\n<div class=\"zitateSmall qm-element\" style=\"--color:;\">\n    <div class=\"text\">\n                    <div class=\"zitatText\">\n                <p>&#8220;The inclusion of pre-trade data significantly decreases the share of bonds erroneously classified as untradable. Additionally, a factor portfolio constructed from an investable universe built on both pre- and post-trade data outperforms a portfolio containing only post-trade information.&#8221;<\/p>\n\n            <\/div>\n            <\/div>\n    <div class=\"description\">\n                    <div class=\"img\">\n                                <img decoding=\"async\" src=\"https:\/\/www.quoniam.com\/wp-content\/uploads\/2024\/02\/D-W_zitat_Henke-60x60-c-default.jpg\" alt=\"\" loading=\"lazy\"\/>\n            <\/div>\n                            <div class=\"text\">\n                <p><strong>Dr Harald Henke,<\/strong><br \/>\nHead of Fixed Income Strategy<\/p>\n\n            <\/div>\n            <\/div>\n<\/div>\n<\/div><\/div>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-group is-style-smallBG\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<p class=\"wp-block-paragraph\"><strong>Key ideas in the paper<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>This study analyses the incorporation of pre-trade data into the portfolio-management process for USD IG credit by determining which bonds are tradable, at which size, at which cost, and to which performance effect. For example, we use pre-trade bid and ask axes and incorporate these data into the liquidity determination process.<\/li>\n\n\n\n<li>We find that pre-trade data significantly increases the part of the universe that is correctly classified as tradable, adds predictive power to the traded volume, and helps lower the estimation error for transaction costs.<\/li>\n\n\n\n<li>A backtest with different liquid universes, including and excluding pre-trade data, to determine the liquid universe yields annual performance differences of up to eight basis points.<\/li>\n\n\n\n<li>Information is the key to success, particularly in an opaque OTC market such as the corporate bond market. By incorporating pre-trade data into the investment process, value can be added to corporate bond portfolios. Because systematic strategies profit the most from liquid trading, properly addressing the challenges of identifying liquidity is a decisive feature of quantitative factor strategies.<\/li>\n<\/ul>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Read the full Quoniam \u2013 White Paper<\/strong>: <\/p>\n\n\n\n<p><a class=\"btnFullDown\" href=\"https:\/\/www.quoniam.com\/wp-content\/uploads\/2024\/03\/Quoniam-Incorporating-bond-liquidity-data_white-paper.pdf\"><strong>PDF Download<\/strong><\/a><\/p>\n<\/div><\/div>\n\n\n\n<div style=\"height:100px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h6 class=\"wp-block-heading has-text-align-center\">YOU MIGHT ALSO BE INTERESTED IN<\/h6>\n\n\n\n<div class=\"wp-block-group alignfull\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n\n\n        <div class=\"newsSliderWrapper qm-element\" style=\"--color:;\">\n            <div class=\"newsSlider\">\n                                    \n                    <div class=\"slide\">\n                    \n                        <div class=\"newsTeaserWrapper cell\">\n                                                            <a href=\"https:\/\/www.quoniam.com\/en\/video\/fixed-income-factor-investing-part-1\/\" title=\"How can investors profit from investing in fixed income factor strategies? - Part 1 of 2\">\n                                    <div class=\"newsTeaser\">\n                                        <div class=\"image\">\n                                            <img decoding=\"async\" src=\"https:\/\/www.quoniam.com\/wp-content\/uploads\/2024\/02\/Quo-Fixed-Income-D-W-Grafik-2-448x220-c-default.png\" loading=\"lazy\"\/>\n                                        <\/div>\n                                        <div class=\"info\">\n                                            <div class=\"preHeader\">\n                                                <div class=\"cat\">\n                                                    Video\n                                                <\/div>\n                                                <div class=\"date\">\n                                                    February 2024\n                                                <\/div>\n                                            <\/div>\n                                            <div class=\"headline\">How can investors profit from investing in fixed income factor strategies? &#8211; Part 1 of 2<\/div>\n                                            <div class=\"introText\">\n                                                                                                    <p>How can a multi-factor approach be an additional source of diversification for fixed income investors? 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We spoke to them about their research, what they found and what it means for investors.<\/p>\n\n                                                                                            <\/div>\n                                        <\/div>\n                                    <\/div>\n                                <\/a>\n                                                    <\/div>\n                    <\/div>\n                                    \n                    <div class=\"slide\">\n                    \n                        <div class=\"newsTeaserWrapper cell\">\n                                                            <a href=\"https:\/\/www.quoniam.com\/en\/artikel\/selection-component-credit\/\" title=\"How can investors measure the selection component of credit portfolios?\">\n                                    <div class=\"newsTeaser\">\n                                        <div class=\"image\">\n                                            <img decoding=\"async\" src=\"https:\/\/www.quoniam.com\/wp-content\/uploads\/2023\/08\/2023-08_selektionskomponente_KEY-448x220-c-default.jpg\" loading=\"lazy\"\/>\n                                        <\/div>\n                                        <div class=\"info\">\n                                            <div class=\"preHeader\">\n                                                <div class=\"cat\">\n                                                    Article\n                                                <\/div>\n                                                <div class=\"date\">\n                                                    August 2023\n                                                <\/div>\n                                            <\/div>\n                                            <div class=\"headline\">How can investors measure the selection component of credit portfolios?<\/div>\n                                            <div class=\"introText\">\n                                                                                                    <p>Investors who want to measure the selection performance of a credit portfolio are often confronted with the problem of having to make a simple but sufficiently precise measurement of this performance. 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Contrary to the [&hellip;]<\/p>\n","protected":false},"author":11,"featured_media":150916,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_seopress_robots_primary_cat":"none","_seopress_titles_title":"Incorporating pre-trade bond liquidity data into corporate bond management","_seopress_titles_desc":"Dr Harald Henke, Max Geilen and Tobias Stein, CFA analyse the value of liquidity information in the management of corporate bond portfolios.","_seopress_robots_index":"","footnotes":""},"categories":[44],"tags":[89,84,120],"class_list":["post-150902","post","type-post","status-publish","format-standard","has-post-thumbnail","category-article","tag-data","tag-fixed-income","tag-whitepaper"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/posts\/150902","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/comments?post=150902"}],"version-history":[{"count":24,"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/posts\/150902\/revisions"}],"predecessor-version":[{"id":160972,"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/posts\/150902\/revisions\/160972"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/media\/150916"}],"wp:attachment":[{"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/media?parent=150902"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/categories?post=150902"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/tags?post=150902"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}