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AXIS/BONDEDGE Link Functionality for Mortgage-Backed Securities (August, 2008)

Article Summary:

GGY Inc. and Interactive Data Fixed Income Analytics have joined forces to offer an exciting new feature that enables you to seamlessly access Interactive Data's BondEdge cash flow engine from within AXIS. BondEdge, a sophisticated fixed income analytical tool widely used by investment managers, is capable of generating scenario-dependent cash flows and market values for structured finance assets such as mortgage-backed securities. This new feature is available in AXIS starting with the August 2008 release.

AXIS/BONDEDGE Link Functionality

While AXIS can model a wide variety of asset classes, it does not model in-force structured finance assets such as mortgage-backed securities. In the past, a client who was already using BondEdge would set up a portfolio containing these assets and run the analytics in BondEdge, then export the results to a file before importing it into AXIS via our scenario-dependent supplement table feature. The new AXIS/BondEdge feature eliminates most of this manual work while reducing risks associated with human error, and saves you much valuable time. 

The advantages of this new feature include:

  • Seamless access to the BondEdge structured finance cash flow engine within AXIS.
  • As the BondEdge cash flow engine is run on-the-fly, unlimited and dynamically created scenarios can be used.
  • You only need to set up your portfolio in AXIS, not in both applications as long as the securities are in the BondEdge databases
  • No need to project and export cash flows from BondEdge separately.
  • No need to import BondEdge cash flows into AXIS manually.
  • No need to create scenario-dependent supplement tables and links in AXIS to store and retrieve these cash flows. 
  • Significant time savings in the overall process.

How to Use this Feature

  1. You will need a user license with Interactive Data and must have the BondEdge structured finance cash flow engine installed on your computer. Please contact Interactive Data Fixed Income Analytics directly for these requirements.
  2. On the Directories tab of System Parameters in AXIS, select the path of the directory where the BondEdge CF application is installed.
  3. On the Custom Codes tab of Dataset Parameters in AXIS, enable the "#97 - External asset model - BondEdge" feature to activate this feature. Please contact GGY for the activation code.
  4. The yield curve in the processed scenario at the inforce date should be the same as the current yield curve in the BondEdge database. Otherwise, AXIS will display a warning message. BondEdge's CF engine will use its current yield curve for its calculations regardless of the processed scenario yield curve used in AXIS.
  5. Asset Cell Setup:
    1. Create your asset cells in AXIS either interactively or by means of a DataLink batch. Each of these asset cells must contain the CUSIP identifier of the security being modeled in the Sort Column.
    2. In AXIS, CUSIPs can be entered in a batch via the Sort/CUSIP optional field in Asset DataLink. You can also enter CUSIPs interactively by right-clicking on a cell in the Cell list and selecting Advanced -> Sort Column. Once entered, CUSIPs can be viewed by selecting "User defined sort field" on the Preferences tab of System Parameters.
    3. In the Processing section of the cell assumption screen, select "6 - Use external asset models" for the Calendar year results switch, and select "1 - Use BondEdge's cashflow service" for the External asset models switch. This tells AXIS to use the BondEdge cash flow engine for projecting the asset's cash flows.
    4. The Scenario dependency switch in the Processing section must be set to "1 - Recalculation required" and the Yield curve switch in the Asset Features section must be set to "0 - Reference the yield curve from the processed scenario."

    5. Complete the Inforce Volumes section. Note that the Inforce date must be consistent with the pricing date in the BondEdge database. Only inforce assets are allowed to run with this option.

    6. To use the book values projected by BondEdge, select "9 - Use values from BondEdge" for the Amort cost basis method switch in any of the 5 Accounting Basis sections. 

    7. To use the market values projected by BondEdge, select "15 - Use market values from BondEdge" for the Market value method switch in the Market Value section.

Outputs of the AXIS/BondEdge Feature

BondEdge's cashflow service will calculate and return two sets of cash flows: interest and principal.  Interest cash flows will be displayed in the Inflows - income cashflow line and principal cash flows will be displayed in the Inflows - prepayments line of the calendar year report.  Principal cash flows will be used to calculate the outstanding principal at each future report date.  You do not need to specify Income rate and Mortgage payment tables.  Other projections that are also available include:

  • amortized cost basis
  • market value
  • accrued income
  • modified duration

Cash flows are assumed to be paid monthly, at the end of each policy month from the issue date.  The actual payment frequency may be less frequent and depends on the cash flows returned from BondEdge's cashflow service. Issue date, Purchase date and Maturity date will be ignored.  The asset is assumed to mature on last cash flow date.

Integration Of AXIS With BondEdge From A Systems Point Of View

Please refer to the following KB article for details:


Interactive Data Corporation is a leading global provider of financial market data, analytics and related services to financial institutions, active traders and individual investors.


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