Bond-Related Derivatives

Frank J. Fabozzi, Marielle Jong () and Mounia Khamlich Fischer
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Frank J. Fabozzi: Johns Hopkins University’s Carey School of Business
Marielle Jong: Grenoble Ecole de Management
Mounia Khamlich Fischer: Assurances du Crédit Mutuel

Chapter Chapter 3 in Derivatives Applications in Asset Management, 2025, pp 43-66 from Springer

Abstract: Abstract Bond-related derivatives, including futures, forwards, swaps, and options, are indispensable tools for managing risk and optimizing portfolio performance in fixed-income markets. This chapter provides a comprehensive overview of these instruments, focusing on their structures, mechanics, and applications. Interest rate futures, such as U.S. Treasury and Euro-Bund futures, offer solutions for managing duration and hedging interest rate risks. Forward rate agreements (FRAs) enable locking in future interest rates, while swaps—including interest rate, inflation, and credit default swaps (CDS)—address exposure to specific risks. Options on fixed-income instruments, such as swaptions and caps/floors, add flexibility in handling rate volatility and customized hedging. By understanding these tools, portfolio managers can effectively navigate interest rate fluctuations, hedge credit risks, and enhance returns within a dynamic and evolving bond market.

Keywords: Bond derivatives; Interest rate futures; Swaps and swaptions; Credit default swaps; Hedging strategies; Fixed-income risk 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_3

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DOI: 10.1007/978-3-031-86354-7_3

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