Managing Bond Portfolios必看课件资料.ppt

CHAPTER 16 Managing Bond Portfolios Immunization Immunization is a way to control interest rate risk. Widely used by pension funds, insurance companies, and banks. Immunization Immunize a portfolio by matching the interest rate exposure of assets and liabilities. This means: Match the duration of the assets and liabilities. Price risk and reinvestment rate risk exactly cancel out. Result: Value of assets will track the value of liabilities whether rates rise or fall. Table 16.4 Terminal value of a Bond Portfolio After 5 Years Table 16.5 Market Value Balance Sheet Figure 16.9 Growth of Invested Funds Figure 16.10 Immunization Cash Flow Matching and Dedication Cash flow matching = automatic immunization. Cash flow matching is a dedication strategy. Not widely used because of constraints associated with bond choices. Substitution swap Intermarket swap Rate anticipation swap Pure yield pickup Tax swap Active Management: Swapping Strategies Horizon Analysis Select a particular holding period and predict the yield curve at end of period. Given a bond’s time to maturity at the end of the holding period, its yield can be read from the predicted yield curve and the end-of-period price can be calculated. INVESTMENTS | BODIE, KANE, MARCUS INVESTMENTS | BODIE, KANE, MARCUS Copyright ? 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Bond prices and yields are inversely related. An increase in a bond’s yield to maturity results in a smaller price change than a decrease of equal magnitude. Long-term bonds tend to be more price sensitive than short-term bonds. Bond Pricing Relationships As maturity increases, price sensitivity increases at a decreasing rate. Interest rate risk is inversely related to the bond’s coupon rate. Price sensitivity is inversely related to the yield to maturity at which the bond is selling. Bond Pricing Relationships Figure 16.1 Change in Bond Price as a Function of Change in Yield to Maturity Table 16.1 Prices of 8% Co