16 Trading Strategies, Arbitrage Opportunities, andComplete MarketsA Motivation These are the basic concepts needed to develop thepricing and hedging methodology for fixed incomesecurities and interest rate options. BTrading StrategiesIntuitively, a trading strategy is a dynamicinvestment portfolio involving the traded zero-coupon bonds. Portfolio rebalancings can occur within theinvestment horizon and they are based on theinformation available at the time that the portfoliois rebalanced.
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