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Robots Can Price Your Bonds for You

Matthew S Levine
Robots Can Price Your Bonds for You

Let’s say you’re the chief financial officer of a company with some bonds outstanding, and you want to issue some new bonds, and you are trying to figure out what interest rate you’ll have to pay on the new bonds. The traditional way to do it is to open up your office door, where you will find a pack of investment bankers waiting to talk to you. If you turn the page, you will probably see some supporting data—charts of the yields on your existing bonds, new-issue concessions for other recent issuers in your sector with similar credit ratings, etc.—which serves both to justify the indicative pricing and to show you how much work the banks have done for you and how grateful you should be to them.