Performance Attribution Analysis for Derivatives

Bruce J. Feibel () and Frank J. Fabozzi
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Bruce J. Feibel: State Street
Frank J. Fabozzi: Johns Hopkins University

Chapter Chapter 10 in Derivatives Applications in Asset Management, 2025, pp 173-192 from Springer

Abstract: Abstract Performance attribution analysis is essential for understanding the sources of portfolio returns, particularly when derivatives are involved. This chapter explores the unique role of derivatives in portfolio management, emphasizing their use for exposure modification, hedging, and leveraging rather than direct return generation. It addresses the complexities derivatives introduce, such as leverage, non-linear risk profiles, and dynamic exposure adjustments, which challenge traditional attribution frameworks. By adapting methodologies like the Brinson-style model to include notional values and effective exposures, the chapter provides tools for accurately assessing the impact of derivatives like futures, options, and swaps. Additionally, it discusses best practices for integrating derivatives attribution with overall portfolio analysis, ensuring alignment with strategic objectives. Recognizing limitations such as data quality and leverage effects, the chapter highlights the importance of specialized approaches to deliver meaningful insights into risk and return dynamics.

Keywords: Performance attribution; Derivatives analysis; Notional exposure; Hedging strategies; Leverage effects; Portfolio management (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-86354-7_10

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DOI: 10.1007/978-3-031-86354-7_10

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