Overbond Launches AI-driven Rich-cheap Fixed Income Model to Help Buy-side Firms Systematically Extract Alpha

Overbond’s AI Rich-Cheap Trading Strategy Gives Buy-Side Fixed Income Desks around the Globe a Quantitative Method for Extracting Alpha by Screening for Mispriced Fixed Income Securities

Overbond has added a rich-cheap model to its suite of AI fixed income analytics, allowing buy-side desks around the globe to generate systematic return with a real-time, fully back-tested methodology that is part of a scalable and interoperable trading system.

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“Overbond has harnessed AI and the wealth of new transaction information to bring quantitative trading to buy-side desks through an enhanced rich-cheap model. This new model provides insight well beyond the traditional rich-cheap analysis and is more powerful than what can be created through spreadsheet methods or factor analysis alone”

We’re in a long-running environment of low-rates, tight credit spreads and low secondary-market liquidity. In this new landscape, electronic trading and the use of AI for trade automation have become the new standard and investors are increasingly turning to quant trading and AI in fixed income to increase alpha.

This increased electronification of the markets has created a large amount of useable and accessible real-time and historic trade data that can be aggregated by clients to use for analysis by cutting-edge AI tools. This new generation of AI is being used to perform sophisticated relative value analysis, including enhanced rich-cheap analysis.

“Overbond has harnessed AI and the wealth of new transaction information to bring quantitative trading to buy-side desks through an enhanced rich-cheap model. This new model provides insight well beyond the traditional rich-cheap analysis and is more powerful than what can be created through spreadsheet methods or factor analysis alone,” said Vuk Magdelinic, CEO of Overbond.

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Combining both static and dynamic analysis of multiple factors with AI, Overbond’s rich-cheap model provides a quantitative method for screening for mispriced fixed income securities. It’s a mean-reversion valuation model designed to pre-identify bonds as rich ‘sell’ and cheap ‘purchase’ candidates based on proprietary Overbond valuation metrics and AI non-linear optimization.

The rich-cheap model is offered as an add-on to Overbond’s COBI-Pricing LIVE, which has industry leading coverage of fixed income prices, liquidity scores and trading recommendations. With COBI-Pricing LIVE, fixed income traders have at their fingertips a powerful AI-driven suite that can automate trade flow and improve liquidity risk, price monitoring and reporting. Overbond’s AI works for trades of any size and with varying liquidity profiles, and the system can be integrated with existing systems.

COBI-Pricing LIVE is one of the few trading suites that features a multi-source data input and is the only fixed income analytics suite that allows for the use of alternative data such as S&P Capital IQ Financial Statements. The full interoperability of COBI-Pricing LIVE via bilateral REST APIs allows its AI algorithms to ingest, aggregate and process data from live and historical vendor feeds, internal historical records, OTC settlement layer volume records and voice transactions. Overbond’s suite of AI algorithms analyzes all primary and agency trading routes and voice and electronically executed trades across multiple venues that the fixed income desk is connected to and counterparty types the desk trades with. This comprehensive AI-enhanced data aggregation gives Overbond’s trade automation in fixed income superior coverage, precision and speed.

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