Yield curve strategy Flashcards

1
Q

Investor expected FI portfolio return

A

coupon income
+ rolldown return
+ Delta price due to view of benchmark yields
+ Delta price due to view of yield spread
+ Delta price due to view of currency value changes

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2
Q

butterfly spread

A

+ common measure of yield curve curvatuew
+ = -short-term yield + 2x (mid-term yield) - long-term yield
if spread:
+ butterfly spread >0 => mid-term yield > 2 dau => humped
+ butterfly spread <0 => mid-term yield < 2 dau => saucer

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3
Q

bullet portfolio

A

the portfolio concentrated in single intermediate maturity

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4
Q

barbell

A

combining short and long maturities

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5
Q

cash-based static yield curve strategies

A

include strategies:
+ buy and hold: extend portfolio duration longer than benchmark
+ rolling down the yield curve
+ repo carry trade: user leverage, borrow the lower rate to invest in higher rats

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6
Q

derivative-based static yield curve

A

include following strategies:
+ Long future potision: increase duration
+ receive-fixed swap: to increase the portfolio duration

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7
Q

BPV

A

basic point value: = BPVctd/CFctd

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8
Q

Swap BPV

A

Swap BPV = ModDu swap x Swap notional

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9
Q

increase duration

A

+ cash bond: over-weight longer date bond
+ Swap: receive fix
+ Future: Long contract

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10
Q

decrease duration

A

+ Cash bond: sell bond/overweight shorter-dated bond
+ Swap: Pay fixed
+ Future: short contracts

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11
Q

bull steepener

A

short term fall more than long term

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12
Q

bear steepener

A

long term rise more than short term

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13
Q

bear flatterner

A

Short term raise more than long term

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14
Q

bull flatterner

A

short term fall less then long term

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15
Q

butterfly strategy

A

+ Long bullet short babell or;
+ Short bullet long barbell

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16
Q

unexpected market changes or risk to portfolio return

A

evaluated using scenario analysis

17
Q

Swap carry

A

= fixed-leg income - floating-leg income

18
Q

what affect of portfolio performance if short convexity

A

decrease portfolio performance when yield move

19
Q

what investor view expected when do the negative overall duration

A

rate is rise and bearish trading