Immunizing a Single Liability
Immunization is a fixed-income management process in which the portfolio is managed to minimize the variability of the rate of return …
fixed income
Liability-Driven Investing
Liability-driven investing (LDI) is used when there are definable future liabilities to be paid from portfolio assets. LDI is mostly used …
Leverage in FI Portfolios
Leverage is the use of borrowed capital to increase the magnitude of portfolio positions, and it is an important tool …
Modeling Return
Decomposing expected fixed-income returns allows an investor to differentiate among several important return components. At the most general level, expected …
Fixed Income Mandates
Liability Based Mandates Users of liability-based mandates include individuals funding specific cash flow and lifestyle needs as well as institutions …
Role of Fixed Income
Fixed income is the largest segment of world financial markets. (Real estate may be larger but is not being treated …
Module 40.1-40.2: Option Binomial Trees
We can apply binomial trees to calculate the value of options. Options generate tree paths by the 2 states that …
Module 40.6: The Black Scholes Merton Model
The BSM model allows us to value options continuously in real time, as long as the no-arbitrage condition holds. The …
Module 37.3 LOS 37.c: Expected return on bond given transition in its credit rating
The change in price of a bond when it experiences a change in credit rating is dependent on the modified …
Module 34.1 LOS 34.b: Calculate forward and spot prices using the forward pricing and forward rate models
The forward pricing model states that two investors should be indifferent between paying P for a j+k year zero coupon, …