Applications of CDS to bond portfolio management

Johan Duyvesteyn, Marielle Jong, Frank J. Fabozzi (), Patrick Houweling and Lodewijk Linden
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Johan Duyvesteyn: Robeco
Marielle Jong: Grenoble Ecole de Management (GEM)
Frank J. Fabozzi: Johns Hopkins University
Lodewijk Linden: Robeco

Journal of Asset Management, 2024, vol. 25, issue 6, No 7, 617-625

Abstract: Abstract This article illustrates two fundamental uses of credit default swaps (CDS) in managing bond portfolios. The applications include CDSs in a buy-and-hold strategy to optimize a portfolio’s return-to-risk profile and employing CDS indices to efficiently replicate corporate bond returns. Each application is thoroughly examined, demonstrating how CDS can serve as a versatile tool for mitigating credit risk while striving for higher returns.

Keywords: Derivatives; Credit default swap; Credit default swap index; Credit event; Buy-and-hold strategy; High-yield bonds (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1057/s41260-024-00369-w

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