Bond Trading, Portfolio Rebalancing, and Electronic Exchanges

Gueorgui S. Konstantinov, Frank J. Fabozzi and Joseph S. Simonian

Chapter 8 in Quantitative Global Bond Portfolio Management, 2023, pp 229-257 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The decision pertaining to when and how to trade in the bond market is essential for bond portfolios. After executing the initial trades in a portfolio allocation, a portfolio manager may need to periodically modify their portfolio holdings and adjust their exposure to accommodate changes in the market environment. This activity is referred to as portfolio rebalancing. Trading and rebalancing are natural processes associated with portfolio management as risk and returns change over time and new allocations are desired. Over time, developments in bond markets and technological progress have improved the velocity and efficiency of trading. However, the basic mechanics of how managers trade remain essentially the same. This chapter explains how rebalancing and trading work depending on portfolio management style — discretionary or systematic.

Keywords: Fixed-Income; Currency Management; Portfolio Management; Risk Management; Factors; Portfolio Optimization; Hedging; Portfolio Evaluation; Performance Attribution (search for similar items in EconPapers)
JEL-codes: G11 G12 G15 (search for similar items in EconPapers)
Date: 2023
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