Chapter 2: Overview of Fixed-Income Portfolio Management

In this section

• Roles of Fixed-Income Securities and Mandate Classifications
  Explore the role of fixed-income instruments in portfolio construction, from income generation to liability matching, and learn how mandates are classified by strategy, risk preferences, and investor objectives.
• Fixed-Income Risk and Return Measures, Including Correlation
  Explore key risk and return measures in fixed-income investing, including duration, convexity, yield metrics, spread measures, and correlations with other asset classes, along with real-world illustrations and best practices.
• Bond Market Liquidity and Implications for Portfolio Management
  Explore how bond market liquidity affects transaction costs, performance, and risk management, with real-world examples and practical insights for CFA Level III candidates.
• A Model for Fixed-Income Returns
  Delve into the comprehensive frameworks and factor-based approaches that underpin fixed-income valuation, exploring interest rate models, credit spread influences, and essential term structure dynamics used in constructing robust bond portfolios.
• Leverage in Fixed-Income: Methods, Uses, and Risks
  Explore how leverage in fixed-income portfolios can enhance returns, magnify risk, and serve a variety of strategic functions. Understand repurchase agreements (repos), derivatives, margin requirements, and risk controls for effective leveraged investing.
• Differences in Managing Taxable vs. Tax-Exempt Portfolios
  Discover how tax considerations impact bond selection, after-tax yields, and portfolio strategies for both retail and institutional investors balancing returns and taxes.
• Liability-Driven Investing
  Explore how Liability-Driven Investing (LDI) helps institutions align assets with present and future liabilities, focusing on strategies such as duration matching, credit risk considerations, and derivative usage.
• Cash Flow Matching
  Comprehensive exploration of aligning bond cash flows with future liabilities, covering strategy design, benefits, limitations, and best practices for effective fixed-income portfolio management.
• Laddered Bond Portfolios: Construction and Characteristics
  Learn how to structure a laddered bond portfolio, manage reinvestment risk, and balance maturities for stable cash flows in diverse market climates.
• ESG and Green Bond Investing
  Discover how ESG and Green Bond frameworks shape fixed-income portfolio construction, including best practices, case studies, and guidance on navigating greenwashing and verification challenges.
• Scenario Analysis and Stress Testing in Fixed-Income Portfolios
  Deep dive into interest rate shocks, liquidity strains, and multi-factor stress scenarios that reveal hidden vulnerabilities in fixed-income portfolios.