In cases where a yield to maturity is supplied for all securities in the portfolio and benchmark, FIA can calculate security-specific returns. These returns are due to changes in the spread between whatever curve(s) are associated with the security, and the security's actual market yield, which may not lie on the security's pricing curve.
For instance, an A-rated corporate bond may be priced from a suitable A-rated sector curve. However, the bond's actual yield may lie some distance away from the yield implied by reading off a yield from that curve at the bond's maturity. Such differences typically occur for security-specific reasons, such as embedded options. The returns generated by changes in this security-specific spread are called security-specific returns.
To include security-specific returns in your attribution reports, ensure that
- SecuritySpecificAttribution = true
- for each weight and return datum supplied, a value for YTM (yield to maturity) has also been supplied. Values of YTM must be supplied on all dates for which calculation is active, including the date at the start of the first interval. If a missing value is found and is active, the program will halt with an error report.
Security-specific attribution can be run in conjunction with as many curves as required.
Use of a z-spread generates a zero-coupon curve from which securities can be priced. In contrast, a YTM cannot be used for security pricing as it includes the distorting effects of coupons. Therefore the two approaches are not consistent and cannot be combined.