Fixed-Income-Portfolio-Management固定收益投资组合管理课件.ppt
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- Fixed Income Portfolio Management 固定 收益 投资 组合 管理 课件
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1、Fixed Income Portfolio ManagementProfessor Paul BolsterNortheastern UniversityBoston, Massachusetts USAFixed Income Portfolio Managemento What is fixed income?o Valuation of fixed income securitieso Sources of risk in fixed income portfolioso Passive, active, and other management strategiesWhat is f
2、ixed income?o “Fixed income” refers to all securities that provide (or promise to provide) contractual payments during their lifetime. Fixed income securities often make regular payments of interest.o Bonds, Notes, some money market instrumentso Some variable-interest instruments are classified as f
3、ixed incomeBonds Basic Featureso Contract: interest, par, maturityo Senior or Junior claim?o Collateral or Debentureo Sinking Fundo Call (or Put) featureo Conversion featureo Other types (floating rate, ZCB,)Bond Ratingso Assessment of creditworthinesso Issues are rated, not firmso Ratings agencieso
4、 Investment grade vs. Junko Ratings changes and valueBond Ratings S&P Outlineo Industry AnalysisnIndustry RisknMarket PositionnOperating Efficiencyo Management Evaluationo Financial AnalysisnEarnings ProtectionnFinancial Leverage and asset protectionnCash flow adequacynFinancial flexibilitynAccounti
5、ng qualityBond Ratingo Springfield debt downgraded to junk-bond status (Boston Globe, June 3, 2004)o “only 2 percent of cities nationwide are considered to be such a risky investment. The move by Standard & Poors puts Springfield in the company of such downtrodden economically burdened cities as Cam
6、den, N.J.; Troy, N.Y.; Cranston, R.I.; and Pittsburgh” One year transition matrixFromToAaaAaABaaBaBC&DAaa91.97.380.720000Aa1.191.37.10.30.200A0.12.691.25.30.60.20Baa00.25.487.95.50.80.2Bond Valuationo Present value!o Assume cash flows are known, adjust for risk in the required return (or Yield-to-Ma
7、turity)o Example:n ATT 6s 10 (as listed on the NY Bond Exch.)n Par value = $1,000; Matures: Oct. 15, 2011n Semiannual coupon=(6% of $1,000)/2=$30n Payments: April 15, October 15YTMBond Price = PV of Coupons + PV of Par5.14%1,050.03349.03701.005.64%1,020.58343.08677.516.14%992.13337.27654.866.64%964.
8、63331.61633.027.14%938.04326.08611.967.64%912.34320.69591.658.14%887.50315.43572.068.64%863.47310.30553.169.14%840.23305.29534.939.64%817.75300.41517.35Bond Valuation Exampleo Assumes valuation on October 15, 2004Bond Valuationo What is the Yield to Maturity (YTM)?n Assumes:o No defaulto Bond held t
9、o maturityo Coupons reinvested at the YTMn Its the “promised” yield based on current market valuen Contrast with alternatives:o Current Yieldo Yield to Callo Realized Yield (or Horizon Yield)Sources of risk in fixed income portfolioso Interest rate risknIf interest rates change, all bonds are affect
10、ednMore important for bonds with high credit ratingso Default risknIf the economy improves/worsens, all bonds are affectednMore important for bonds that are speculative in naturenCaptured by bond ratingInterest Rate Risk Bond Pricing Theorems1.Bond prices and yields vary inversely- recall example on
11、 previous slide2.Long term bonds are more sensitive to i-rate changes than short term bondsnex.ABCnCoupon ($)909090nFace Value1,000 1,000 1,000nMoodys RatingAaAaAanTerm-to-maturity5 yrs. 10 yrs. 15 yrs.nYTM9%10%11%nPrice1,000939856nLet yields decrease by 10% (8.1%, 9%, and 9.9% respectively). n nNew
12、 prices are:1,0361,000931n%Price change:3.6%6.6%8.8%Interest Rate Risk Bond Pricing Theorems3.Bond price sensitivity increases at a decreasing rate as maturity approachesex. See previous slide. The price change for B is 3% higher than A, but the price change for C is only 2.2% higher than B.4.Bond p
13、rices are more sensitive to a decline in i-rates than a rise in i-ratesnLet yields increase by 10% (9.9%, 11%, 12.1% respectively).nNew prices are:966882790n%Price changes:-3.4%-6.1%-7.7%nCompare these price changes with the ones resulting from a decline in i-rates provided above.Interest Rate Risk
14、Bond Pricing Theorems5.Low coupon bond prices are more sensitive to i-rate changes than high coupon bond pricesnex.ABnCoupon ($)60100nFace Value1,000 1,000nMoodys RatingAaAanTerm-to-maturity10 yrs. 10 yrs.nYTM12%12%nPrice661887nLet yields decrease to 11%.nNew prices are:706942n%price changes:6.7%6.2
15、%6.Prices are more sensitive when i-rates are low than when they are high.Durationo Maturity is imperfect measure of short term or long term nature of bondoneed to take into account effect of couponsocompute average: “effective maturity” o (Macaulay) duration: weighted average of cash-flow times, wi
16、th weight of date (t) proportional to cash-flow (CFt) present value:TtttTtttYTMCFYTMtCFD11)1()1(Example of Duration CalculationYear t CouponPV coupon t*PV200413028.8961664428.896166442004.523027.8329478355.66589567200533026.8088497780.426549322005.543025.82243284103.2897314200653024.87231057124.3615
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