24
Reporting
24.1 TREATMENT OF RESIDUALS
Residuals are a fact of life in attribution. Even for the most liquid securities, it is most unlikely that there will be a perfect match between the price as calculated from market curves, and the market price.
The consumer of attribution reports should therefore be deeply suspicious of a report that claims zero residual return. On many occasions, residual return may be redefined as credit return, but this should always be made clear to the user.
The best way to treat residuals is to accept that they convey useful information and that they act as a check that pricing accuracy lies within acceptable limits.
24.2 UNATTRIBUTED RETURN
A very useful ...
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