Bond Portfolio Management, Swap Strategy, Duration, and Convexity

Cheng Few Lee

Chapter 79 in Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives:In 4 Volumes, 2024, pp 2501-2539 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter first focuses on the bond strategies of riding the yield curve and structuring the maturity of the bond portfolio in order to generate additional return. This is followed by a discussion on swapping, which is essentially interest-rate swapping. Next is an analysis of duration or the measure of the portfolio sensitivity to changes in interest rates with and without convexity, after which immunization is the focus. The convexity is essentially discussed as a nonlinear relationship between bond price and duration. Finally, a case study of bond-portfolio management is presented in the context of portfolio theory. Overall, this chapter presents how interest rates change affect bond price and how maturity and duration can be used to manage portfolios.

Keywords: Financial Accounting; Financial Auditing; Mutual Funds; Hedge Funds; Asset Pricing; Options; Portfolio Analysis; Risk Management; Investment Analysis; Momentum Analysis; Behavior Analysis; Futures; Index Futures; CDCs; Financial Econometrics; Statistics; Financial Derivatives; Financial Accounting (search for similar items in EconPapers)
JEL-codes: G1 G11 G12 G3 M41 M42 (search for similar items in EconPapers)
Date: 2024
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