Future Challenges
The sheer variety of the fixed-income markets, and the pace of innovation in this area, means that provision of an attribution capability from scratch will continue to present significant challenges. In no particular order, issues to be faced include
- many more risk factors than in the equity world
- much more complex instrument types
- new types of instrument continually appear
- no standard approach to attribution – sector, yield-curve based, factor based
While there remain numerous challenges to solve, the state of fixed income attribution is much less murky than was the case even five years ago. The reasons include
- better third-party software systems
- more demanding users
- easier access to data
- cheaper and more powerful computing systems
- better understanding of how to perform attribution
Read more about this topic: Fixed-income Attribution
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