Analysis and Management of Bond Portfolios

Analysis and Management of Bond Portfolios

SUMMARY

This three-day workshop will provide participants with a comprehensive overview of the bonds as an asset class as well as an introduction to pricing, measurement of the sensitivity of bond prices to changes in interest rates and management of the risk associated with bonds.. The programme will encourage participation through exercises, computer activities, and case studies

The workshop is designed to address the problems from a practical perspective, rather than taking a detailed academic approach on the topic of bonds.

Human Capital Training

A basic understanding of discounting, compounding, risk free rate of return and internal rate of return is required. However, as the workshop puts the emphasis on the practical use of bonds to construct optimum portfolios, an in-depth knowledge of the theories of term structure of interest rates is not required.

After completing this workshop, you ought to be able to address the following questions:

  1. What are the key features of bonds that affect their risk, return, and market value?
  2. What is the purpose of bond ratings?
  3. How do you read the quotes for the different bonds?
  4. How do calculate the current market value of a bond?
  5. How do you calculate the current yield, yield to maturity, yield to call, and realised yield?
  6. What are spot and forward rates of interest and how can they measured from the yield curve?
  7. What are the different theories of the term structure of interest rates?
  8. What is duration, modified duration, and convexity?
  9. What are the main types of passive bond portfolio management strategies?
  10.  What are the main active bond portofolio management strategies?
  11. What is immunisation and how does it work?

DAY 1

Bond Fundamentals

  • Features of a Bond
  • Bond Characteristics
  • Rates of Return of Bonds
  • The Global Bond Market Structure

Bond Markets in the Middle East & North Africa (MENA)

  • Bond Ratings
  • Obtaining Information on Bond Prices
  • Interpreting Bond Quotes

DAY 2

The Analysis and Valuation of Bonds

  • The fundamentals of Bond Valuation

The Present Value Model and The Yield Model

  • Computing Bond Yields

Nominal Yields, Current Yields, Promised Yield to Maturity, Promised Yield to Call, Realised Yield.

  • Calculating Future Bond Prices

Realised (Horizon) Yield with Differential Reinvestment Rates
Price and Yield Determination on Noninterest Dates
Yield Adjustments for Tax-Exempt Bonds

  • Bond Valuation Using Spot Rates
  • What Determines Interest Rates?
  • Calculating Rates from the Spot Rate Curve
  • Term Structure Theories

Expectations Hypothesis, Liquidity Premium Hypothesis, Segmented Market Hypothesis; Trading Implication of the Term Structure, Yield Spreads.

DAY 3

  • What Determines the Price Volatility of Bonds?

Trading Strategies: Duration Measures; Modified Duration and Bond Price Volatility, Bond Convexity, Duration and Convexity for Callable Bonds, Limitations of Macaulay and Modified Duration.

  • Bond Portfolio Management Strategies
  • Bond Portfolio Performance, Style, and Strategy

Buy-and-Hold Strategy, Indexing Strategy, Bond Indexing in Practice: An Example.

  • Active Management Strategies

Interest Rate Anticipation, Valuation Analysis, Credit Analysis, Yield Spread Analysis

  • Core-Plus Management Strategies
  • Matched-Funding Strategies
  • Contingent and Structured Management Strategies
  • Contingent Immunisation