Bond Portfolio Management Strategies债券投资组合管理的策略
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Performance analysis involves examining tracking error
Passive Portfolio Strategies
Advantages to using indexing strategy
Historical performance of active managers Reduced fees
A composite measure considering both coupon and maturity would be beneficial
Duration
n Ct (t)
D t1 (1i)t
n
t PV(Ct ) t1
nБайду номын сангаасCt
t1 (1i)t
price
Developed by Frederick R. Macaulay, 1938
Where: t = time period in which the coupon or principal payment occurs Ct = interest or principal payment that occurs in period t i = yield to maturity on the bond
effect on a bond’s duration
Duration and Price Volatility
An adjusted measure of duration can be used to approximate the price volatility of a bond
modid fiu erdat io M nacad uu lary ation 1YTM m
Indexing methodologies
Full participation Stratified sampling (cellular approach) Optimization approach Variance minimization
Determinants of Price Volatility
Bond Portfolio Management Strategies
Active, Passive, and Immunization Strategies
Alternative Bond Portfolio Strategies
1. Passive portfolio strategies 2. Active management strategies 3. Matched-funding techniques 4. Contingent procedure (structured active
Characteristics of Duration
Duration of a bond with coupons is always less than its term to maturity because duration gives weight to these interim payments A zero-coupon bond’s duration equals its maturity
Duration
Since price volatility of a bond varies inversely with its coupon and directly with its term to maturity, it is necessary to determine the best combination of these two variables to achieve your objective
An inverse relation between duration and coupon A positive relation between term to maturity and duration,
but duration increases at a decreasing rate with maturity An inverse relation between YTM and duration Sinking funds and call provisions can have a dramatic
1. Bond prices move inversely to bond yields (interest rates) 2. For a given change in yields, longer maturity bonds post
larger price changes, thus bond price volatility is directly related to maturity 3. Price volatility increases at a diminishing rate as term to maturity increases 4. Price movements resulting from equal absolute increases or decreases in yield are not symmetrical 5. Higher coupon issues show smaller percentage price fluctuation for a given change in yield, thus bond price volatility is inversely related to coupon
management)
Passive Portfolio Strategies
Buy and hold
Can be modified by trading into more desirable positions
Indexing
Match performance of a selected bond index
Passive Portfolio Strategies
Advantages to using indexing strategy
Historical performance of active managers Reduced fees
A composite measure considering both coupon and maturity would be beneficial
Duration
n Ct (t)
D t1 (1i)t
n
t PV(Ct ) t1
nБайду номын сангаасCt
t1 (1i)t
price
Developed by Frederick R. Macaulay, 1938
Where: t = time period in which the coupon or principal payment occurs Ct = interest or principal payment that occurs in period t i = yield to maturity on the bond
effect on a bond’s duration
Duration and Price Volatility
An adjusted measure of duration can be used to approximate the price volatility of a bond
modid fiu erdat io M nacad uu lary ation 1YTM m
Indexing methodologies
Full participation Stratified sampling (cellular approach) Optimization approach Variance minimization
Determinants of Price Volatility
Bond Portfolio Management Strategies
Active, Passive, and Immunization Strategies
Alternative Bond Portfolio Strategies
1. Passive portfolio strategies 2. Active management strategies 3. Matched-funding techniques 4. Contingent procedure (structured active
Characteristics of Duration
Duration of a bond with coupons is always less than its term to maturity because duration gives weight to these interim payments A zero-coupon bond’s duration equals its maturity
Duration
Since price volatility of a bond varies inversely with its coupon and directly with its term to maturity, it is necessary to determine the best combination of these two variables to achieve your objective
An inverse relation between duration and coupon A positive relation between term to maturity and duration,
but duration increases at a decreasing rate with maturity An inverse relation between YTM and duration Sinking funds and call provisions can have a dramatic
1. Bond prices move inversely to bond yields (interest rates) 2. For a given change in yields, longer maturity bonds post
larger price changes, thus bond price volatility is directly related to maturity 3. Price volatility increases at a diminishing rate as term to maturity increases 4. Price movements resulting from equal absolute increases or decreases in yield are not symmetrical 5. Higher coupon issues show smaller percentage price fluctuation for a given change in yield, thus bond price volatility is inversely related to coupon
management)
Passive Portfolio Strategies
Buy and hold
Can be modified by trading into more desirable positions
Indexing
Match performance of a selected bond index