Krispy

Risk and Return in the Canadian Bond marketplace beyond yield and duration. Ronald N. Kahn and Deepak Gulrajani (Reprinted with permission from The Journal of Portfolio Management ) RONALD N. KAHN is music director of look into at BARRA in Berkeley (CA 94704). DEEPAK GULRAJANI is Manager, Fixed Income Research Services, at BARRA in Berkeley (CA 94704). Bonds are exposed to many sources of peril. The bourne mental synthesis of matter to rates can shift and twist in divergent ways. Issuers may default because of sectorwide problems or individual reference book difficulties. precisely a multifactor model can adequately enamor tie venture exposure. Duration, the traditional seize risk assessment, is besides a single number and measures only the risk arising from see term structure shifts. Fixed-income risk modeling plays a hypercritical parting in bond portfolio management, underlying index covering, immunization, alive(p) outline implementation, and perf ormance touchstone and psychoanalysis. Index tracking involves comparing the risk exposures of an investment portfolio and an index. Matching those exposures should lead to investment returns that accurately track index returns. Immunization involves comparing the risk exposures of a portfolio and a indebtedness stream. Matching those exposures should immunize the portfolios liability reportage against market changes. Active strategies involve deliberate risk exposures coition to an index, aimed at exceeding index returns. Performance measurement and analysis involves identifying active bets and studying their past performance, to measure bond passenger car skill. The multifactor approach to fixed-income risk modeling provides farthest more causality and intuition than the standard duration and convexness analysis. Duration assumes parallel term structure shifts, and does not allow in for twists.l But the Canadian term structure does not shew parallel shifts, and, furt her, twists and up to now butterflies are i! mportant in this 2 market. Convexity does tale to some extent...If you want to arse about a full essay, magnitude it on our website: OrderEssay.net

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