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. …
fixed income
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 …
Alternative Methods of Obtaining Passive Bond Market Exposure
The nature of the fixed-income markets generally makes full replication impractical. Enhanced indexing provides one acceptable alternative. Stratified sampling (cell matching) can …
Bond Indexes
Many investors seek a broader exposure to the fixed-income universe. These investors may be attracted to the risk versus return …
Immunizing Multiple Liabilities
The principle of interest rate immunization applies to multiple liabilities in addition to a single liability. There are several approaches …
Interest Rate Immunization
An interesting connection among the portfolio convexity, Macaulay duration, dispersion, and cash flow yield: The portfolio dispersion and convexity statistics …
Effects of Yield Curve Changes
Assume a portfolio that is being used to immunize a single liability (sometimes called a bullet) due in five years, with …
Macaulay Duration, Money Duration and Modified Duration
Macaulay duration is the weighted average time until the cash flows of an instrument are received. That is why Macaulay duration …