Fixed-Income Portfolio Analytics: A Practical Guide to by David Jamieson Bolder

By David Jamieson Bolder

The booklet deals an in depth, strong, and constant framework for the joint attention of portfolio publicity, threat, and function throughout quite a lot of underlying fixed-income tools and danger components. via broad use of useful examples, the writer additionally highlights the mandatory technical instruments and the typical pitfalls that come up whilst operating during this sector. ultimately, the e-book discusses instruments for checking out the reasonableness of the most important analytics to assist construct and preserve self belief for utilizing those innovations in daily determination making. it will be of prepared curiosity to possibility managers, analysts and asset managers accountable for fixed-income portfolios.

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Extra info for Fixed-Income Portfolio Analytics: A Practical Guide to Implementing, Monitoring and Understanding Fixed-Income Portfolios

Example text

We also examined a practical example to demonstrate, at least in a very stylized manner, what might be accomplished. As must be the case in an introductory chapter, our illustrative example skipped over many important and interesting details. The subsequent chapters will address these points. Our final task in this chapter is to provide the reader with a roadmap to the remainder of this book to help understand where, when, and how important details will be addressed. To come to the point, the subsequent chapters are organized as follows: Chapter 2–4 an approximation framework for our analysis; Chapter 5–6 yield-curve construction and dynamics; Chapter 7–9 performance computation and attribution; Chapter 10–12 absolute and relative risk computation and attribution; 21 Convexity is a correction for the necessary approximations made in this return decomposition.

In both cases, one needs to be very aware of how the key characteristics of one’s portfolio compare to the strategic benchmark. If not, one is basically flying blind. Without a clear understanding of a portfolio’s characteristics relative to the benchmark, one cannot actually know if one has taken, or continues to take, a passive stance or is unknowingly undertaking active positions. There is an exception to this rule. The only time one is uninterested in relative portfolio characteristics is when one perfectly replicates the strategic benchmark.

Our perspective on the aforementioned principles may deviate dramatically from the reader’s view. This may lead to different approaches, different levels of complexity, and ultimately, different analytics. What we present in the following chapters is suggestive and we therefore encourage the reader to challenge our thinking, look for mistakes or weaknesses in logic, simultaneously seek improvements, and communicate these points to us. In this way, hopefully this book itself will prove useful. 6 An Appetizer We have dedicated a substantial amount of ink to defining our (somewhat abstract) version of portfolio analytics.

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