SYSTEMS AND METHODS FOR EVALUATING LIQUIDITY OF A MARKET
Systems and methods are provided for calculating a liquidity metric. A spline is fit to a set of securities. A model yield to maturity is calculated based on the spline for each security in the set of securities. A market yield to maturity is calculated based on market data for each security in the set of securities. A liquidity metric is calculated for the set of securities based on the calculated model yields to maturity and the calculated market yields to maturity.
1 . A method comprising:
fitting a spline to a set of securities;
calculating a model yield to maturity based on the spline for each security in the set of securities;
calculating a market yield to maturity based on market data for each security in the set of securities; and
calculating a liquidity metric for the set of securities based on the calculated model yields to maturity and the calculated market yields to maturity.
2 . The method of claim 1 , wherein calculating the liquidity metric comprises:
calculating a fitted spread for the set of securities as a difference between the calculated market yields to maturity and the calculated model yields to maturity.
3 . The method of claim 1 , wherein calculating the liquidity metric comprises:
minimizing a root mean square error between the calculated market yields to maturity and the calculated model yields to maturity.
4 . The method of claim 1 , wherein the spline comprises at least one of a piecewise cubic spline or a piecewise exponential spline.
5 . The method of claim 1 , wherein fitting the spline to the set of securities comprises:
refitting the spline to the set of securities at periodic intervals of time.
6 . The method of claim 1 , further comprising:
filtering a plurality of securities based on one or more exclusion rules to generate the set of securities.
7 . The method of claim 1 , wherein calculating the market yield to maturity comprises:
calculating the market yield to maturity based on a composite price of each security in the set of securities.
8 . The method of claim 1 , wherein:
calculating the model yield to maturity is performed in parallel for each security in the set of securities; and
calculating the market yield to maturity is performed in parallel for each security in the set of securities.
9 . A non-transitory computer readable medium storing computer program instructions, which, when executed on a processor, cause the processor to perform operations comprising:
fitting a spline to a set of securities;
calculating a model yield to maturity based on the spline for each security in the set of securities;
calculating a market yield to maturity based on market data for each security in the set of securities; and
calculating a liquidity metric for the set of securities based on the calculated model yields to maturity and the calculated market yields to maturity.
10 . The non-transitory computer readable medium of claim 9 , wherein calculating the liquidity metric comprises:
calculating a fitted spread for the set of securities as a difference between the calculated market yields to maturity and the calculated model yields to maturity.
11 . The non-transitory computer readable medium of claim 9 , wherein calculating the liquidity metric comprises:
minimizing a root mean square error between the calculated market yields to maturity and the calculated model yields to maturity.
12 . The non-transitory computer readable medium of claim 9 , wherein the spline comprises at least one of a piecewise cubic spline or a piecewise exponential spline.
13 . The non-transitory computer readable medium of claim 9 , wherein fitting the spline to the set of securities comprises:
refitting the spline to the set of securities at periodic intervals of time.
14 . The non-transitory computer readable medium of claim 9 , the operations further comprising:
filtering a plurality of securities based on one or more exclusion rules to generate the set of securities.
15 . An apparatus comprising:
a processor; and
a memory to store computer program instructions, the computer program instructions when executed on the processor cause the processor to perform operations comprising:
fitting a spline to a set of securities;
calculating a model yield to maturity based on the spline for each security in the set of securities;
calculating a market yield to maturity based on market data for each security in the set of securities; and
calculating a liquidity metric for the set of securities based on the calculated model yields to maturity and the calculated market yields to maturity.
16 . The apparatus of claim 15 , wherein the spline comprises at least one of a piecewise cubic spline or a piecewise exponential spline.
17 . The apparatus of claim 15 , wherein fitting the spline to the set of securities comprises:
refitting the spline to the set of securities at periodic intervals of time.
18 . The apparatus of claim 15 , the operations further comprising:
filtering a plurality of securities based on one or more exclusion rules to generate the set of securities.
19 . The apparatus of claim 15 , wherein calculating the market yield comprises:
calculating the market yield to maturity based on a composite price of each security in the set of securities.
20 . The apparatus of claim 15 , wherein:
calculating the model yield to maturity is performed in parallel for each security in the set of securities; and
calculating the market yield to maturity is performed in parallel for each security in the set of securities.