Credit Strategy Approaches
Credit strategies normally establish return and risk parameters. A credit strategy is typically designed to achieve a constrained objective. VOCAB: …
CFA
Credit Spread Measures
A simple way to calculate a credit spread is to subtract the yield on a security with little or no …
Investment Grade and High Yield Bond Portfolios
A credit portfolio consists primarily of securities for which credit risk is an important consideration. The credit market is the …
Butterfly and Condor Trades
Butterfly trades are a leveraged way to capture value when curvature changes. They involve taking a long and offsetting short position …
Adjusting Convexity
It is beneficial to have greater convexity when large changes in rates are expected. The convexity will magnify value gain …
Strategies for Changes in Market Level, Slope, or Curvature
Investors often hold individualized expectations about the yield curve that they generate from economic analysis, data mining exercises, following monetary …
Strategies under Assumptions of a Stable Yield Curve
Buy and hold: In an upward sloping curve, extend maturity (and therefore duration) to earn a higher yield and expected return. …
Major Types of Yield Curve Strategies
At the most basic level, fixed-income portfolio returns come either from yield (typically defined by the cash flows associated with …
Introduction (Yield Curve Dynamics, Convexity and Duration Review)
Active yield curve strategies are designed to capitalize on expectations regarding the level, slope, or shape (curvature) of yield curves. …
Laddered Portfolios
A laddered portfolio is a common way to build a bond portfolio for individual clients. Roughly equal par amounts are …