By Frank J. Fabozzi, Lionel Martellini, Philippe Priaulet
So that it will successfully hire portfolio ideas which could keep an eye on rate of interest hazard and/or improve returns, you want to comprehend the forces that force bond markets, in addition to the valuation and probability administration practices of those complicated securities. In complex Bond Portfolio administration , Frank Fabozzi, Lionel Martellini, and Philippe Priaulet have introduced jointly greater than thirty skilled bond industry pros that will help you do exactly that.
Divided into six accomplished components, complicated Bond Portfolio administration will advisor you thru the cutting-edge strategies utilized in the research of bonds and bond portfolio administration. issues lined comprise:
- General heritage details on fixed-income markets and bond portfolio techniques
- The layout of a method benchmark
- Various facets of fixed-income modeling that might offer key elements within the implementation of a good portfolio and chance administration approach
- Interest expense probability and credits probability administration
- Risk components concerned about the administration of a world bond portfolio
jam-packed with in-depth perception and specialist recommendation, complex Bond Portfolio administration is a important source for someone concerned or drawn to this significant undefined.
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Additional info for Advanced bond portfolio management: best practices in modeling and strategies
5% in 2004. 5% return was excellent for a short-term bond fund but terrible for a high-yield bond fund. To answer the question posed by the portfolio manager, one needs a benchmark for comparison. That is, one needs to know “what” the portfolio manager was trying to do. Answering the “what” question involves selecting a benchmark, that is a portfolio—actual or conceptual—whose return can be used as a basis of comparison. In the above example, it could be a short-term, investment-grade bond portfolio, a high-yield bond portfolio, or a broad taxable, investment-grade bond portfolio.
In subsequent sections, we use this framework to quantify the costs of a bond swap—specifically, the trading costs—and later we expand the cost/benefit framework to a broader portfolio context. A Review of Spread Duration Math Investors decide to trade when they conclude that doing so will enhance portfolio returns or reduce risk. ” They love to swap from low-yielding to high-yielding bonds. Although yield 30 BACKGROUND is a key element of the decision to trade, it is not the only element, and it is often not the most important element.
A flat yield curve may also affect liquidity and the bid-ask spread indirectly through other channels. First, a flattening of the curve often spurs investors to reallocate funds to the money markets and away from bond markets. When funds flow out of the bond market, spreads must widen to equate supply and demand. Second, the yield curve generally flattens during the late stage of the business cycle, when the Fed raises short rates to quell inflationary pressures. 1 Greater uncertainty about the economy gives rise to higher information costs and wider bid-ask spreads.