- Increase your understanding of the different types of risk faced by bond portfolio managers
- Learn about measures of risk such as duration and convexity as well as more advanced measures
- Review fixed-income derivatives, futures, options and swaps and understand their usefulness in bond portfolio management for hedging or speculating
Who should attend?
The typical participant will be an investment professional, analyst or plan sponsor. This includes bond analysts, pension fund advisors, risk managers, private client portfolio managers and consultants to the fund management industry. Those responsible for the management of fixed-income portfolios within banks, pension funds and insurance companies are advised to attend.
Accreditation
Amsterdam Institute of Finance is registered with CFA Institute as an Approved Provider of continuing education programs. This program is eligible for 24 CE credit hours as granted by CFA Institute. If you are a CFA Institute member, CE credit for your attendance at this event will be automatically recorded in your CE Diary.
Faculty
Pierre Hillion is the de Picciotto Chair at INSEAD in Alternative Investments and Visiting Professor at UCLA and CalTech in the USA. At INSEAD, he has received the Best Teacher for Electives, Singapore campus on several occasions.
For information about admission, please see our Practical Information.
Program Content
Day 1
Risk and Return for Bonds without Embedded Options
- Yield measures
- Risk measures: Part I
- Duration: Definition, usefulness, properties and limitations
- Risk Measures: Part II
- Convexity: Definition, usefulness, properties and limitations
- Usefulness of duration in bond portfolio management: Immunization
- Usefulness of convexity in bond portfolio management: Butterfly swaps
Risk and Return for Bonds with Embedded Options
- Adjusted yield measures
- Adjusted risk measures
- Adjusted duration
- Adjusted convexity
- Bond Portfolio Management for Bonds with Embedded Options
Day 2
New Measures of Risk
- Factor based measures of risk
- The shift
- The tilt
- The flex
Use of Derivative Instruments in Bond Portfolio Management: Part I - Interest Rate Swaps
- Interest rate swaps as portfolio of bonds
- Risk of interest rate swaps: Interest rate risk and credit risk
- Swap rationale
- Advanced swaps: Forward swaps and swaptions
- Usefulness of swaps in bond portfolio management
Day 3
Use of Derivative Instruments in Bond Portfolio Management: Part II - Futures
Pricing Long Term Bond Futures
- Pricing of futures: General principles
- Pricing of bond futures
- Conversion factors
- Cheapest bond to deliver
- Delivery options
Use of Bond Futures in Bond Portfolio Management
- Difficulties of hedging with bond futures
- Hedging with bond futures
- Duration hedging
- Factor hedging
- Price regression hedging
- Regression / duration hedging
- Generalized duration hedging
Strategies with Bond Futures
Day 4
Use of Derivative Instruments in Bond Portfolio Management: Part III - Options
- Pricing interest rate options
- Typology of interest rate options
- Simple payoff diagrams
- Pricing interest rate options: The Black, Derman and Toy Model
Use of Interest Rate Options in Bond Portfolio Management
- Pricing examples
- Bonds with embedded options
- Sinking funds
- Reshaping bond portfolio returns with options
- Hedging asymmetric risk with options
- Duration hedging with convexity adjustment using futures and options
