Fixed Income > Bond Trading 1999 - Bond Hedging & Risk Management
Bond Management Strategies
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Transcript of Bond Management Strategies
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Presentation byVasuki
VeerendragoudaVijay patil
Vani
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There are two types
• 1) Active bond management strategies• 2) Passive bond management strategies• Bond investors may adopt passive or
active approaches to the management of their portfolios. The passive approach is usually identified with a buy-and-hold strategy. Active bond mgt involves switching and swapping bonds as circumstances change in the markets for fixed-income securities.
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Buy-and –hold strategy
• A buy-and-hold strategy essentially means purchasing and holding a security to maturity or redemption (eg:by the issuer via a call provision) and then reinvesting cash proceeds in similar securities
• • By holding securities to maturity, any capital change
resulting from interest change is neutralised or ignored( by holding to maturity the par amount of the bond will be received)
• • The passive or buy-and-hold strategy is used primarily
by income-maximizing investors like reired persons,endowment funds, bond mutual funds and insurance companies.
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Bond ladder strategy
• Building a bond ladder means buying bonds scheduled to come due at several different dates in the future, rather than all in the same year
• Bond laddering is a smart-investment concept for conservative individuals who are unsure of interest rate movement and are afraid to bet on any one forecast.
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