Methods of obtaining market data for price testing

The cost and speed of obtaining quality prices to make a business statement on the
controls and accuracy is the business of running the control function. The goal is
obtain the maximum amount of quality market data in the shortest amount of time.
This can be obtained when the control team is focused on analysis rather than data
gathering, which can be time consuming, frustrating and disruptive. The disruptive
nature and the actual amount of time to implement some of the manual processes
is frequently significantly underestimated in terms of costs and speed of delivery.
The sources of market data are placed into the following categories:
Ω Automated market data extract – prices are available by market data providers or
broker pages in a form that can be downloaded directly into a spreadsheet or
database. Automated market data extract with parsing – prices are available by
market data providers or broker pages but need to be in a test string data format.
The data needs to be ‘parsed’ to obtain prices in a numeric comparable state.
Ω Manual broker pages – automated data available entered manually in a spreadsheet
or in work papers
Ω Newspaper – price data available in various financial papers. Note that the risk
controller should make sure that the firm is not the market data provider to the
newspaper, otherwise you will be testing like to like.
Ω Calling brokers – to obtain market data, sometimes required for OTC derivatives
or illiquid bonds.