The point is that we cannot avoid model risk in immunization beacause in calculation of BPV is depend upon modified duration, where we assume a small parallel change in yield curve but we ignore about twists of the yield curve also donot take the effect of convexity (ie the large change in yield curRead more
The point is that we cannot avoid model risk in immunization beacause in calculation of BPV is depend upon modified duration, where we assume a small parallel change in yield curve but we ignore about twists of the yield curve also donot take the effect of convexity (ie the large change in yield curve) , on the other hand we can theoretically eliminate or reduce the liquidity risk
Interest rate risk and credit migration risk is more important for IG bonds than default risk, and default risk is more important than credit migration or interest rate risk for HY bonds . As spread duration is mostly related to credit migration, so the statement is incorrect . The main reason behinRead more
Interest rate risk and credit migration risk is more important for IG bonds than default risk, and default risk is more important than credit migration or interest rate risk for HY bonds . As spread duration is mostly related to credit migration, so the statement is incorrect . The main reason behind this logic is that in time of crisis people want to invest in safe investment opportunities (ie IG bonds) rather than risky HY bonds .
When calculating total return in example 27 (reading 14: fixed income active management: credit strategies) we add coupon income+ price appreciation from the point of view of a CDs protection seller. I am asking that in a case where we have to calculate total return from a point of view of CDs proteRead more
When calculating total return in example 27 (reading 14: fixed income active management: credit strategies) we add coupon income+ price appreciation from the point of view of a CDs protection seller. I am asking that in a case where we have to calculate total return from a point of view of CDs protection buyer the total return should be coupon income (CDs spread at market for the buyer)+ price appreciation is not it ?
Case 1 : suppose yield curve is downward sloping Let 4yr govt yield 6% and 6yr govt yield 4% And let 5yr corporate yield 7% So the yield spread = 7-4=3% 5yr interpolated govt yield =5% G spread=7-5=2% So, yield spread is greater than G spred I am trying to say that option A is right but option C isRead more
Case 1 : suppose yield curve is downward sloping
Let 4yr govt yield 6% and 6yr govt yield 4%
And let 5yr corporate yield 7%
So the yield spread = 7-4=3%
5yr interpolated govt yield =5%
G spread=7-5=2%
So, yield spread is greater than G spred
I am trying to say that option A is right but option C is also right
Tegarding FI
The point is that we cannot avoid model risk in immunization beacause in calculation of BPV is depend upon modified duration, where we assume a small parallel change in yield curve but we ignore about twists of the yield curve also donot take the effect of convexity (ie the large change in yield curRead more
The point is that we cannot avoid model risk in immunization beacause in calculation of BPV is depend upon modified duration, where we assume a small parallel change in yield curve but we ignore about twists of the yield curve also donot take the effect of convexity (ie the large change in yield curve) , on the other hand we can theoretically eliminate or reduce the liquidity risk
See lessFixed Income Active Management: Credit Strategies
Interest rate risk and credit migration risk is more important for IG bonds than default risk, and default risk is more important than credit migration or interest rate risk for HY bonds . As spread duration is mostly related to credit migration, so the statement is incorrect . The main reason behinRead more
Interest rate risk and credit migration risk is more important for IG bonds than default risk, and default risk is more important than credit migration or interest rate risk for HY bonds . As spread duration is mostly related to credit migration, so the statement is incorrect . The main reason behind this logic is that in time of crisis people want to invest in safe investment opportunities (ie IG bonds) rather than risky HY bonds .
See lessWhy option 3 is correct no where in the question mentioned that the portfolio is managed against a benchmark. Why not option a ?
if we assumed the portfolio is not benchmarked then option A will correct or not ?
if we assumed the portfolio is not benchmarked then option A will correct or not ?
See lessCredit default swap
When calculating total return in example 27 (reading 14: fixed income active management: credit strategies) we add coupon income+ price appreciation from the point of view of a CDs protection seller. I am asking that in a case where we have to calculate total return from a point of view of CDs proteRead more
When calculating total return in example 27 (reading 14: fixed income active management: credit strategies) we add coupon income+ price appreciation from the point of view of a CDs protection seller. I am asking that in a case where we have to calculate total return from a point of view of CDs protection buyer the total return should be coupon income (CDs spread at market for the buyer)+ price appreciation is not it ?
See lessWhy not option c?
Case 1 : suppose yield curve is downward sloping Let 4yr govt yield 6% and 6yr govt yield 4% And let 5yr corporate yield 7% So the yield spread = 7-4=3% 5yr interpolated govt yield =5% G spread=7-5=2% So, yield spread is greater than G spred I am trying to say that option A is right but option C isRead more
Case 1 : suppose yield curve is downward sloping
See lessLet 4yr govt yield 6% and 6yr govt yield 4%
And let 5yr corporate yield 7%
So the yield spread = 7-4=3%
5yr interpolated govt yield =5%
G spread=7-5=2%
So, yield spread is greater than G spred
I am trying to say that option A is right but option C is also right
Equity portfolio management – issues of scale
I am asking the question regarding this example
I am asking the question regarding this example
See lessEquity Swap – Changing Allocation
Can we do these three swaps?
Can we do these three swaps?
See less