Point-by-Point: A Taxonomy for Data Analytics in Financial Services

In order for data analytics in financial services to be understood and trusted throughout a firm or institution, there needs to be a common hierarchical classification (taxonomy) of those analytics. Having such a taxonomy helps CDOs ensure clarity when analytics from various parts of the organization are brought together in reports, meetings and submissions.

The terms ‘analytics’, ‘reporting’ and ‘quantitative research’ are terms that are used for the querying and analysis of data. This data comes in different categories and forms. In order to ensure that GoldenSource can align with our clients’ terminology and approaches we have set out a taxonomy for data analytics in financial services.

We have found that there are five key categories of analytics most often referred to across the financial services buy side and sell side:

• Market Data Analytics
• Business Reporting
• Quant Research & Development
• Investment Analytics
• Econometric Analysis

Examples in Each Category of the Taxonomy for Data Analytics in Financial Services

The table below provides examples of the different types of analytics in each of the five categories we’ve used in the taxonomy for data analytics in financial services. We use this taxonomy as both a guide to structure discussions around our clients’ business requirements and also to organize the capabilities of our market data and risk data management software products.

Market Data Analytics

• Trends and statistical analysis of market data
  • Validation exception counts by Contributor – 6 month trend
  • Vendor Data Quality
  • Max price in the last month for an instrument
  • Longest stale periods for an instrument over the last year for
    • Equities
    • Fixed Income
    • Rates
    • Credit
    • Commodities
• Exchange Volume increases in the last month
• Variability of historical prices
  • Stdev
  • Rolling Z-Score
  • EWMA Volatility
• Variability of historical prices – Rolling Z-Score
• Correlation evaluated prices: BVAL vs Apex
• Number of times per month that Market data teams could not complete by cut-off
• Market data exceptions by position size
  • High
  • Medium
  • Low
• Proxy Usage Report

Business Reporting

• Sell Side – Finance
  • IPV
    • Largest IPV Variances by Desk – monthly trend
    • IPV Tolerance breaches
    • IPV Limits Review
  • PRUVAL
    • Distribution of Mid Prices by instrument
    • Distribution of Bids & Asks by instrument
    • EBO Overrides
  • Fair Value and Daily P&L
    • Level 1, 2, 3 Positions by Trading Desk
    • Level 1, 2, 3 by Instrument Type
    • Proxy Approaches for Level 3
    • Bid-Ask Spread History by Instrument Type
    • Bid-Ask Spread Adjustment History
    • Model Limitations by Product
  • Liquidity
    • Contributor Count per P&L Price
    • Average Bid-Ask Spread Size by Type
    • Daily Traded Volume
    • Position by Maturity of Tenor
• Sell Side – Market Risk
  • Risk Factor by Asset Class
    • Price Count by Risk Factor
    • Internal vs External Risk Factor
    • Risk Positions by Risk Factor
    • Risk Factor per Asset Class
  • Value-At-Risk
    • Daily VaR Breaks by Instrument Type
    • VaR Bask-Testing by Month
    • VaR Data Lineage Report
  • NMRF & RPOs
    • RPO to Risk Factor Mapping
    • RPO Count by Risk Factor
    • Rolling 1-year Modellability Checks
    • Modellability Early Warning flags
• Buy Side
  • NAV Oversight Validation Breaches
  • Benchmarks Used Report
  • Portfolio Risk / Return Reporting
    • Portfolio Returns by
      • Asset
      • Sector
    • Bottom Up Attribution Analysis
    • Top Down Attribution Analysis
    • Investment Returns
    • Portfolio Sharpe Ratio
    • Investment Betas
    • Investment Standard Deviation
  • Performance
    • by Sector
    • by Account
    • by Country, Provence
  • Corporate Actions
  • Unit Price Proxy Modelling
  • Position Holdings
    • By Fund
    • Positions/Holdings: daily
    • Positions/Holdings: Month / Period End
    • Holdings drill-down
    • Holdings valuation
• Sell Side (Exclusive)
  • Curve & Surface Model Calibrations
    • FX – Heston
    • Rates – Hull White 2-Factor
  • Derivative Pricing Models
    • Black-Scholes
    • Black
    • Monte Carlo based
  • Statistical analysis of curve & surface data
    • Principal Component Analysis

Investment Analytics

• Multi-Factor Pricing models
  • Alpha
  • SMB Beta
  • UMD Beta
  • HML Beta
  • Fama-French 3-Factor
• Smart beta
• Equity Valuation- Fundamentals Regressions
• Portfolio Analytics
  • Yield-to-maturity
  • Yield-to-call
  • Yield-to-worst
  • Duration
  • Modified Duration
  • Convexity
  • Price Earnings
  • Price Book Ratio

Economic Analysis

• Regression Analyses on
  • Non-Farm Payrolls vs GDP
  • S&P 500 vs GDP
  • Inflation vs Non-Farm-Payrolls
  • Wages vs Education
• Using econometric modelling techniques such as:
  • Linear regression
  • Generalized linear models
  • Probit
  • Logit
  • Tobit
  • ARIMA
  • Vector Autoregression
  • Cointegration
  • Hazard