Internal rating approach for corporate bonds

4 Experts
For interest rates and derivatives.
USD 1.5 Mn.
Extra yields per year.


An interest-rate-based hedge fund.


Our client wanted to create a credit spread portfolio of corporate bonds, which were outperforming in nature, and track its portfolio weights.


Based on a detailed understanding of the client's expectations and restrictions, SG Analytics adopted the following solutions:
  • SG Analytics deployed a team of 4 interest rate and derivative experts to analyze existing fixed income products, especially the ones pertaining to corporate bonds.
  • The team created customized credit risk analytics and corporate debt structures that matched the S&P and Moody's ratings of corporate bonds.
  • The team identified discrepancies and areas where bonds appeared riskier than measured by S&P and Moody's. We recommended removing these bonds from the client's portfolio.
  • SG Analytics recommended a revamping of the portfolio with weightings of each corporate bond portfolio.

Value Delivered

SG Analytics provided a completely new model for corporate bond credit ratings, which could challenge the existing ratings by S&P and Moody's.
The client was able to conduct internal ratings and hence assessment on which bonds to go overweight and underweight in its portfolio.
The fund was able to calculate portfolio weights and refactor its portfolio in a completely new fashion, thereby earning an extra 1.5 Mn. in yields in a year's time.