Trumid Launches New Adaptive Model for Continuous Intraday Corporate Bond Pricing

FVMP automatically uses both endogenous and exogenous market data to produce a single, defensible price per bond.

Trumid, a financial technology company that brings trading efficiency and market intelligence to credit market professionals, today launched its new service for continuous bond pricing, known as the Fair Value Model Price (FVMP). FVMP is an adaptive model that produces a price for approximately 22,000 corporate bonds every five minutes based on price movements from multiple data sources, including the Trumid Market Center. Trumid believes the new service will improve liquidity by providing a constant source of pre-trade transparency, empowering traders to execute trades with confidence.

“Like the prices of other securities, bond prices are affected by numerous factors,” said Jason Quinn, Head of Product Development at Trumid. “FVMP automatically uses both endogenous and exogenous market data to produce a single, defensible price per bond. Our Trumid Labs team has built a pricing model that is able to be more consistent, objective and adaptive than human-evaluated prices.”

In FVMP’s nine-month testing period, Trumid Labs, Trumid’s internal quantitative analytics group, found that FVMP-produced bond prices were consistently in line with the subsequent TRACE(TM) data. For example, investment grade bonds scored by FVMP were within 0.55 points of the following TRACE print 95% of the time, and high-yield bonds were within 0.82 points. At the 80th percentile, the absolute error of the overall FVMP model is 0.28 points.

“In addition to using novel model-based approaches to achieve consistent pricing performance across the large corporate universe, Trumid Labs has also developed a framework for which services such as these can be evaluated,” said Jason Quinn. By comparing and measuring the difference between any recent TRACE print and the prior FVMP value of that bond, Trumid Labs is able to calculate the absolute error of each estimate. Trumid calls this approach the regularized next trade metric (RNTM).

For the first time in the industry, Trumid is making comprehensive FVMP pricing publicly available on its website, alongside the trailing three months of FVMP performance reports and a complete…

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