Portfolio hedging

Discussion in 'Fixed Income (P1.T4 or P2.T5)' started by JohnnyBond, Feb 24, 2009.

  1. JohnnyBond

    JohnnyBond New Member


    I am trying to figure out a way to compare an entire portfolio of fixed income securities with a smaller set of securities. For instance, if a fixed income portfolio contains 100 securities with different maturites and coupons, it could be practical to compare the portfolio to 2-3 fixed income securities, so a trader would be able to confirm that his position is in line with his market views...

    I was told that some important institutions are already using that approach.

    I have surfed on the Internet but without any success.

    Do you have any idea where I could begin my search? Any books or websites would help.

    Thank you very much for your help.

  2. David Harper CFA FRM

    David Harper CFA FRM David Harper CFA FRM (test) Staff Member


    That that reminds me of several ideas, but maybe i don't know this procedure...

    It sounds like you may be referring to some variation "portfolio mapping;" e.g., where a bond portfolio might be mapped to a reduced number of risk factors (cash flow or duration vertices)?
    I wonder if this refers to a key rate duration (or duration vector) type model?
    Or, maybe principal component analysis (PCA)? If one of these terms sounds familiar, I could point you to resources(s)....David

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