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  1. Buy-and-hold Strategy (Passive Management)
    Selects a portfolio of bonds based on the objectives and constraints of the client with the intent of holding these bonds to maturity.
  2. Indexing Strategy (Passive Management)
    Portfolio of bonds that will be matched as closely as possible to the performance of a specified bond index.
  3. Bond Ladder
    Divide their investment funds evenly across the portfolio into instruments that mature at regular intervals.
  4. Active Management Dimensions
    • Scalability (i.e., how large a position can
    • be taken)

    Sustainability (i.e., how far into the future the strategy can be successfully employed

    Risk-adjusted performance

    Extreme values (i.e., how exposed the strategy is to the chance of a large loss).
  5. Interest Rate Anticipation (Active Management)
    Riskiest active management strategy because it involves relying on uncertain forecasts of future interest rates.
  6. Valuation Analysis (Active Management)
    Select bonds based on their intrinsic value, which is determined based on their characteristics and the average value of these characteristics in the marketplace.
  7. Credit Analysis (Active Management)
    Detailed analysis of the bond issuer to determine expected changes in its default risk.
  8. Yield Spread Analysis (Active Management)
    Yield volatility and the behaviour of embedded options

    Yield volatility and transactional liquidity

    The effect of yield volatility on the business cycle
  9. Active Global Bond Investing (Factors)
    The local economy in each country that includes the effect of domestic and international demand.

    • The impact of this total demand and domestic monetary policy on
    • inflation and interest rates.

    • The effect of the economy, inflation, and interest rates on
    • the exchange rates among countries.
  10. Passive Management Strategies
    Buy and Hold

  11. Active Management Strategies
    Interest rate anticipation

    Valuation analysis

    Credit analysis

    Yield spread analysis

    Sector/country analysis

    Prepayment/option analysis
  12. Core-plus Management Strategies
    Enhanced indexing

    Active/passive "plus" sectors
  13. Matched-funding Strategies
    Dedicated (exact cash match)

    Dedicated (optimal cash match)

    Classical immunisation

    Horizon matching
  14. Contingent and Structured Strategies
    Contingent immunisation

    Structured management
  15. Dedication
    Bond portfolio management techniques that are used to service a prescribed set of liabilities.
  16. Immunisation
    The process intended to eliminate interest rate risk
Card Set
370 - 8
370 - 8