Final Exam Review Outline Spring 2012

Final Exam Review Outline Spring 2012 - ANALYSIS OF FIXED...

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ANALYSIS OF FIXED INCOME REVIEW OUTLINE FINAL EXAM CHAPTER 5 (Martellini) Basics of interest rate risk: Qualitative Insights Five Theorems of bond pricing Reinvestment risk Capital gain risk Hedging with duration Duration (PROBLEM) CHAPTER 7 (Martellini) Passive fixed income portfolio management Straightforward replication Replication by stratified sampling Tracking error minimization Optimization procedure Factor based covariance matrix One factor market model Shrinkage estimators Factor based replications Pros and Cons of Stratified Sampling versus Tracking Error Minimization CHAPTER 8 (Martellini) Active fixed income portfolio management Market timing: Trading on interest rate predictions Analyzing the strategy Is the strategy performing well? Timing bets on interest rate level Timing bets on specific changes in the yield curve Different kinds of butterflies Measuring performance of a butterfly: Total return measure Semi-hedged strategies Scenario analysis Constructing a scenario analysis
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Final Exam Review Outline Spring 2012 - ANALYSIS OF FIXED...

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