Butterfly Analysis

Butterfly Analysis window uses advanced analytical suite of tools for pricing, hedging and analysing several weighting types of butterfly strategies. It includes a unique Principle Component Analysis tool with in-depth relative value and regression analysis to identify the optimal hedges against the yield curve dynamics: level, slope and curvature risks.

There exist many variations of butterfly trades, allowing traders to profit from a steepening, flattening or unchanging yield curve. Each strategy also carries its own risks, including: the role of transaction costs in implementation of the butterfly strategy; what should be the appropriate weights and benchmark spread in evaluating the profitability of the trade; and the effect of different holding periods on the strategy’s profitability.

Butterfly Analysis provides users with all the necessary analytical tools to build and actively manage butterfly strategies, including:

  • bespoke pricing calculators, regression and relative value analysis;
  • high quality dynamic charting for key risk values and model outputs, for a clearer view and a better understanding of butterfly barbells arbitrage.
  • advanced hedging techniques and weighting schemes to construct and track the performance of custom butterfly trade ideas.
  • a robust PCA trading model with tailored dimensionality reduction, a perfect way to express an overall market view, and to identify market-neutral curve dislocation trade opportunities.
  • ability to setup and create real time trade alerts, which respond to market movement for perfect entry and exit timing.

Traders and active bond fund managers searching for other ways to demonstrate superior investment and trading skills, can use Butterfly Analysis tool to successfully determine how to weight, and perhaps more importantly, when to switch out of a long position in the medium-dated bonds, into a duration-weighted amounts of short-dated and long-dated bonds, and vice versa.