Matrix Trading

Dictionary Says

Definition of 'Matrix Trading'


A fixed-income trading strategy that looks for discrepancies in the yield curve, which an investor can capitalize upon by instituting a bond swap. Discrepancies come about when current yields on a particular class of bond (corporate, municipal, etc.) don't match up with the rest of the yield curve or its historical norms.

Investopedia Says

Investopedia explains 'Matrix Trading'


An investor performing a matrix trade could be looking to profit purely as an arbitrageur - by waiting for the market to "correct" a yield spread discrepancy - or by trading up for free yield, for example, by swapping debt with similar risks but different risk premiums.

Yield curves can be thrown off historical patterns for any number of reasons, but most of those reasons will have a common source: uncertainty about the future of financial markets. Individual classes of bonds may also be inefficiently priced for a period of time, such as a high-profile corporate default that sends shock waves through corporate debt with similar ratings.



comments powered by Disqus
Hot Definitions
  1. Private Equity

    Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity.
  2. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  3. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  4. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  5. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  6. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
Trading Center