Derivatives Strategies for Bond Portfolios

In this paper, we examine how standard exchange-traded fixed-income derivatives (futures and options on futures contracts) can be included in a sound risk and asset management process so as to improve risk and return performance characteristics of managed portfolios.


Felix Goltz

Research Engineer at the EDHEC Risk and Asset Management Research Centre

Lionel Martellini

Professor of Finance at EDHEC Graduate School of BusinessScientific Director of the EDHEC Risk and Asset Management Research Centre

Volker Ziemann

Research Engineer at the EDHEC Riskand Asset Management Research Centre

Our results show that the non-linear character of the returns on protective option strategies offers appealing risk reduction properties in the pure asset management context. Consequently, such strategies should optimally receive a significant allocation, especially when investors are concerned with minimising extreme risks. In an asset liability management context, we also show that fixed-income derivatives in general, and recently launched long-term futures contracts in particular, offer significant shortfall risk reduction benefits. These results have potentially significant implications in the context of an increased focus on matching liability portfolios.
Derivatives Strategies for Bond Portfolios...
(-1.00 B)
Type: Working paper
Date: le 06/08/2007
Extra information : Pour plus d'informations, nous vous prions de vous adresser à Joanne Finlay, Direction de la recherche de l'EDHEC [] Les opinions exprimées sont celles de l'auteur et n'engagent pas la responsabilité de l'EDHEC.
Research Cluster : Finance

See Also

Bond Portfolio Optimization in the Presence of Duration Constraints - EDHEC-Risk Institute research article in the Journal of Fixed Income
- 19-07-2018
We are pleased to enclose an EDHEC-Risk Institute research article published in the...
Lionel Martellini discussed ageing population: goal-based investing and its application to the retirement problem
- 10-07-2018
Lionel Martellini, Professor of Finance at EDHEC Business School and Director of EDHEC-...
[EDHEC Experience] Light on the first urban Lab of Latin America
- 09-07-2018
Wide Open: in the explorers' shoes The third stopover of the Wide Open project has been...
EDHECInfra Days: Infrastructure Investors need proper benchmarks
- 05-07-2018
Earlier this month we held the first EDHECinfra Days event in London, bringing together...