Aggregating fragmented credit derivatives market data

Nov 14, 2023

OTCStreaming has introduced a suite of new APIs designed to seamlessly integrate into its credit market email price extraction pipeline. These innovative APIs provide a comprehensive capability to analyze the market and price credit derivatives portfolios using the user's scattered data. The backend supporting these APIs will drive the upcoming stages of OTCStreaming's real-time pipeline, scheduled for early 2024.

With these new APIs, users can harness their private data to create a tailored credit market pricing environment. The API effectively addresses the intricate challenge of utilizing asynchronous market data points across a fragmented set of securities to compute a complete bid-offer of survival probabilities for each reference entity. This is foundational to credit derivatives valuation, similar to the discount factor for interest rate derivatives valuation. Deriving survival probabilities from asynchronous market data is a complex task, and different credit experts employ various methods, including their own interpolation and extrapolation techniques, to form opinions based on fragmented information. The APIs offer a lot of flexibility and transparency for fitting each user's view including an OTCStreaming default setting.

Credit default swaps premia as of 10th November 2023 — Figure 1. Most expensive credit default swaps premia (in upfront %) as of 10th November 2023. The dot are market data used while the envelop is the model bid/offer interpolation and left and right extrapolation.

In addition to calculating survival probabilities, the APIs offer an advanced capability for estimating credit index option volatility surfaces. These surfaces simplify the comparison of cross-asset volatilities, particularly by employing option moneyness as the second axis instead of the strike. Operating within a straightforward and adaptable framework for pricing OTC derivatives, the APIs expose latent market variables such as default intensities, spot interest rates, and volatilities, empowering users to articulate Greeks and scenarios with clarity.

Volatility offer surface per maturity and moneyness — Figure 2. Volatility offer surface per maturity (in month) and moneyness for Europe and US investment grade credit index swaps.

Tailored for credit specialists seeking to streamline the intricacies of aggregating fragmented OTC derivatives data, these APIs facilitate a transition to advanced data-driven investment strategies and automated risk monitoring. While the APIs can be used independently with a premium subscription, their primary design purpose is to extract meaningful insights from private subscription data, using private emails data to power real-time credit screeners or updates in a risk management system.

To get further details on the APIs contact contact@otcstreaming.com.

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