Interest Rate Immunization
An interesting connection among the portfolio convexity, Macaulay duration, dispersion, and cash flow yield: The portfolio dispersion and convexity statistics …
level III
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 …
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 …
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 …
Long/Short, Long Extension, and Market-Neutral Portfolio Construction
Benefits of Long-Only Investing Long-term risk premiums, such as the market risk premium, are earned by investors going net long securities. The capacity …