MIS 4500 Lecture Notes - Credit Default Swap, Interest Rate Swap, Yield Spread
29 Apr 2013
School
Department
Course
Professor
Document Summary
Chapter 29: relative-value methodologies for global credit bond portfolio management. Relative value: ranking of fixed-income investments by sectors, structures, issuers, and issues in terms of their expected performance during some future period of time. Relative-value methodologies: liquidity and trading analysis: total return analysis, primary market analysis, secondary trading rationales and constraints analysis, spread analysis, structure analysis, credit curve analysis, credit analysis, asset allocation / sector analysis. Total return analysis: optimize risk-adjusted total return; analyze detailed dissection of past returns and project expected returns; uncover patterns (large v. small issue performance variation, seasonality, election-cycle effects, gov"t benchmark auction effects, etc. ) 1. dominancy of bullet structures translates into scarcity value for structures w/ embedded call and put features. 2. bonds w/ maturities beyond 20 yrs are small share of outstanding credit debt. 3. use of credit derivatives has skyrocketed. Liquidity and trading analysis: maybe trade potential liquidity disadvantage for incremental yields. Secondary trade rationales: popular reasons for trading:
