Bond Liquidity Scoring AI Model White Paper

With a multi-year decline in dealer inventories and higher capital requirements, sharp increase in aggregate outstanding debt instruments, and proliferation of riskier instruments like leveraged loans, the subject of bond market liquidity risk has been attracting attention throughout financial institutions, regulators, and policy makers. Although liquidity risk affects most, if not all, bond market participants, it has a tremendous impact on open-ended mutual funds and several similar product categories, which allow their shareholders to request redemptions at any time. Therefore, effective liquidity risk management is most critical during times of market distress.