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Data Analytics for Corporate Debt Markets: Using Data for Investing, Trading, Capital Markets, and Portfolio Management by Robert S. Kricheff

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17. Liquid Bond Indexes

Introduction

As should have been apparent from Section IV, “Indexes,” creating a corporate bond index to gauge the broad movements of the credit markets is difficult. Even when compared with the U.S. equity markets where 3,000 securities in the Russell 3000 cover over 97% of U.S. listed companies by market capitalization, to cover 95% of the U.S. corporate bond market, you would have to track over 10,000 investment-grade bonds and 2,500 high-yield bonds. Even more challenging, money managers and investors need to account for the fact that on any given day, only 400 corporate bonds trade with more than a $10 million notional size. This, of course, does not even begin to address the leveraged loan market. This creates a ...

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