Premium Essay

Portfolio Report Fixed Income

In: Business and Management

Submitted By elephantrides
Words 300
Pages 2
FIN 443
Portfolio Report: Week 4

* Fixed Income * Japan’s Central Bank has instituted negative interest rates. It’s now the fifth major central bank to do so. * The Fed met after Japan’s decision and released a more conservative statement compared to their earlier actions of this year so far. * Treasury yields were down especially for the 5 and 10 year treasuries. * Last week the fed committee had a meeting and one of the biggest things that was observed from the meeting was that the committee will monitor global and economic development due to the recent uncertainty of potential global growth. * The fed had a general outlook for increasing interest rates, but for now they will be looking at income as a performance driver in the market. * Puerto Rico came up with a plan on Monday to reduce its debt by approximately 46%. Not many details about the plan were released, but from what we have found its obvious and of great importance to have great and high level of participation for all involved. Puerto Rico has by May first to pay the a large debt service payment.

* FX * Preliminary Q4 earnings of Great Britain’s GDP indicated a .5% growth, totalling to 2.2% growth for the full year. * British exit from the European Union more likely as British voters fear immigration and instability of the EU. * The European Central Bank remains under pressure from financial markets to provide even more monetary stimulus. The preliminary estimate of December inflation showed rates of .4% for annual inflation, compared to .2% back in November. * EUR/USD is currently trading at the same levels as last week. * The South African Reserve Bank hiked policy rates to .5% after a divided vote at the Monetary Policy Committee meeting. The SARB is aiming to control…...

Similar Documents

Premium Essay

Fixed-Income Securities vs. Common Stock Securities

...that represent ownership interest that the shareholders in an organization hold and debt securities representing borrowed funds that must be paid back. In this essay I will be discussing the significance of understanding the differences between fixed income securities and common stock securities. In the United States, the sales of securities are regulated by organizations like the Financial Industry Regulatory Authority and the Securities and Exchange Commission or for short the SEC. Publicly traded companies have two classes of securities they issue, which are common stock securities and preferred stock securities. A security is what is considered a paper asset with the potential to be traded in small denominations (mostly) in the secondary market. Securities that pay a fixed amount of income are considered to be fixed-income securities i.e. bonds or preferred stocks. Bonds are debt securities that are dispensed by the government and corporations having a face value, or par. Unlike bonds preferred stocks are a representation of equal ownership within the issuing corporation having no maturities but the ability of the giver to cash in, or call the shares at par. Now a common stock security on the other hand is different from fixed-income securities. They are considered to be the simple form of ownership of any organization or corporation. Every corporation issues a specific number of common stock shares, which are approved for issuance by a board of directors. Every......

Words: 567 - Pages: 3

Premium Essay

Vietnam Fixed Income Securities

...International University 2013 VIETNAM FIXED INCOME MARKET Project for Fixed Income Securities course Hàn Khánh Phương Dương Khánh Ngọc Nguyễn Kim Ngân Nguyễn Phúc Trọng Phạm Lương Nữ Hoàng Table of Contents I. INTRODUCTION AND OVERVIEW THE VIETNAM FIXED INCOME MARKET 3 II. TIMELINE 4 III. VIETNAM’S PRIMARY MARKET AND SECONDARY MARKET 5 IV. STATE OF FIXED INCOME MARKET IN VIETNAM 6 I. INTRODUCTION AND OVERVIEW THE VIETNAM FIXED INCOME MARKET The bond market (also known as the credit, or fixed income market) is a financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the Secondary market, usually in the form of bonds. The primary goal of the bond market is to provide a mechanism for long term funding of public and private expenditures. The "bond market" usually refers to the government bond market, because of its size, liquidity, relative lack of credit risk and, therefore, sensitivity to interest rates. Because of the inverse relationship between bond valuation and interest rates, the bond market is often used to indicate changes in interest rates or the shape of the yield curve. The yield curve is the measure of "cost of funding". The Securities Industry and Financial Markets Association (SIFMA) classify the broader bond market into five specific bond markets. * Corporate * Government & agency. * Municipal *......

Words: 1610 - Pages: 7

Premium Essay

Fixed Income Financial Model

...Lab 7 VBA Fixed Income Financial Model ------------------------------------------------- In this lab, you will start to build VBA application related to Fixed Income Financial Model Part 1: Commonly Used Financial Functions There are many EXCEL functions that you may use in FI Financial Modeling. In this lab, we explore the following functions: 1. RATE 2. PV 3. PRICE 4. YIELD 1. RATE The Rate function calculates the interest rate required to pay off a specified amount of a loan, or reach a target amount on an investment, over a given period. Alternately, it calculates the return you will have to earn in order to accumulate a certain amount of money by making a number of equal periodic investments. The syntax of the function is: RATE( nper, pmt, pv, [fv], [type], [guess] ) Where the arguments are as follows: nper | The number of periods over which the loan or investment is to be paid | pmt | The (fixed) payment amount per period | pv | The present value of the loan / investment | [fv] | An optional argument that specifies the future value of the loan / investment, at the end of nper payments . If omitted, [fv] takes on the default value of 0 | [type] | An optional argument that defines whether the payment is made at the start or the end of the period The [type] argument can have the value 0 or 1, meaning: 0 - the payment is made at the end of the period 1 - the payment is made at the beginning of the period If the......

Words: 805 - Pages: 4

Premium Essay

Portfolio Report

... | |STOCK-TRAK REPORT | |ADMS 3531 N W2012 | | | |Eugene Myslinsky | |208083420 | |3/27/2012 | | | For the past three months we have been participating in a Stock-Trak Simulation exercise to experience what it takes to trade in the stock market. In this report, we will explain which strategies I chose to follow, which investments were the most and least successful to my portfolio and lastly, what advice we would give those who are looking to trade with real......

Words: 1363 - Pages: 6

Premium Essay

Fixed Income Portfolio Analysis

...Part Ⅰ Portfolio Overview Holding Period: 09/14/2010 ~ 11/30/2010 76 days Settlement Date: 09/14/2010 Position: 6 of 6 Part Ⅱ Securities Analysis *CN Government Bond 10-year is based on CNY. CNY per USD=6.74690 as of 09/14/10; CNY per USD=6.66730 as of 11/30/10 CNY per USD=6.64110 as of 10/15/10 1. CN Government Bond 10-Year The yield and price were relatively stable during the first 30 days of my holding period until Oct. 19th when the People’s Bank of China increased its benchmark rate by 0.25 percentage point on in order to take control of the stubborn inflation. The yield increased and the price fell. However Chinese RMB has been appreciating from 6.74590 USD/CNY to 6.66730 USD/CNY during my holding period. The foreign exchange gains partially offset the loss of market value of the bond. The rate of return is 1.269%. I will sell the bond because the Chinese government has potential to continuously increase the interest rate and besides the US dollar shows a strong appreciation trend recently. 2. US. Government Bond 10-Year There are several factors contributed to the fluctuation of the price and yield of Treasury. In early September, the interest rate for 2-7 year treasury notes have declined to record low level, causing the market value of the portfolio increased. The decline of the price of Treasuries at the end of September is due to profit-taking after recent gains. The yield surged and the price decreased after Fed announcement of QEⅡ. I......

Words: 405 - Pages: 2

Premium Essay

Report About Constructing Portfolio of Stocks.

...investors have found that diversification of investment through portfolio investment can meet the investment goals in a better way than investing in a single security. Therefore, to make the maximum return at a given risk preference level, it is important to design and create a portfolio that would provide the optimum return for per unit of risk borne. Here I have constructed an optimum portfolio with different scenarios such as maximizing theta in case of short sell allowed and not allowed; minimizing standard deviation in case of short sell allowed and not allowed, maximizing return for a given risk in case of short sell allowed and not allowed, minimizing risk for a given return in case of short sell allowed and not allowed of 8 securities from a set of 16 securities of 5 sectors selected from the listed companies in Dhaka stock exchange. I have analyzed very sophisticatedly to minimize the risk of the portfolio. PORTFOLIO CONSTRUCTION In simple words, portfolio refers to combination of assets. An investor invests a pool  of different investments  to make a profit while aiming to preserve the invested (principal) amount. These investments are chosen generally on the basis of different risk-reward combinations: from 'low risk, low yield' (gilt edged) to 'high risk, high yield' (junk bonds) ones; or different types of income streams: steady but fixed, or variable but with a potential for growth. I am focusing on a portfolio that is well balanced with moderate level of......

Words: 3431 - Pages: 14

Premium Essay

Understanding Fixed Interest in a Portfolio

...Understanding Fixed Interest in a Portfolio Fixed interest securities should play a crucial defensive role in a balanced investment portfolio, providing predictable, regular income and acting as a foil against the losses made on equity holdings during times of economic downturn. However, a poorly constructed defensive allocation will fail in meeting those objectives in times of market turmoil, as demonstrated in recent years. Not all assets that have been labelled fixed income are “true to label”, and furthermore, not even all bonds are made equal. Advisers need to be aware that some are inherently much more risky than others, and others are just not fit for purpose if the objective is to create a safe, predictable source of income that also diversifies a portfolio’s equity risk. FIXED INTEREST/BONDS – A DEFINITION Broadly, a bond can be defined as any debt instrument issued by a government/quasi-government entity or company/special purpose vehicle. In effect a bond is a commoditised, tradable loan where an investor provides capital in exchange for a legally enforceable promise by the issuer to pay the investor regular interest over a fixed period of time and principal at maturity. Naturally, the ability to enforce payment will be a function of the solvency of the borrower. Therefore, assessing credit quality is vital in fixed interest investing. High quality issuers generally fund at lower yields whereas higher yields are paid by issuers of lower credit quality due to...

Words: 3242 - Pages: 13

Premium Essay

Fixed Income Securities

...Fixed Income Securities Tools for Today’s Markets Second Edition BRUCE TUCKMAN John Wiley & Sons, Inc. Copyright © 2002 by Bruce Tuckman. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-750-4470, or on the web at Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, e-mail: Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and......

Words: 146024 - Pages: 585

Premium Essay

Fixed Income

...Fixed Income Risk Management Second Assignment QUESTION 1 Maturity 0.5 1 1.5 Interest Rate 0.01 0.016 0.02 0.022 Discount Factor 0.9940 0.9841 0.9704 0.9570 Pz(0.T) 99.4018 98.4127 97.0446 95.6954 2 Table 1- Zero option prices A. Given the current term structure of interest rates, we can easily derive the prices of zero-coupon bonds. As the interest rates are continuously compounded, the formulas used to calculate the discount factors and the zero prices are: ������(������, ������) = ������ −������(������,������)(������− ������) ������������ (������, ������) = 100 × ������(������, ������) B. Assuming Ɵi=1% and σ=1.50%, we can set up the Ho-Lee model, which implies the following 3-step interest rate tree (where each step is  = 0.5): 1 1.20% 2.76% 0.64% 2 4.32% 2.20% 0.08% Table 2- Ho-Lee interest rate tree 3 5.88% 3.76% 1.64% -0.48% At each node, the interest rate was calculated using ������������+1,������ = ������������,������ + ������������ × ∆ + ������ × √∆ For upward movements, and ������������+1,������+1 = ������������,������ + ������������ × ∆ − ������ × √∆ For downward movements. The risk neutral probability of an upward or downward movement is set at p*=1/2. The model implied zero-coupon prices are then computed using the different step bond trees (Table 14 in the Appendix). The following table shows the comparison between the implied and the term structure zero-coupon prices for each maturity: the Check row contains the difference......

Words: 1880 - Pages: 8

Premium Essay

Report on Portfolio Theory

...and Standard Deviation--------------------------------------------------Page 9 Correlation Coefficient and Covariance----------------------------------------------------Page 9 Portfolio Risk and Return-------------------------------------------------------------------Page 11 Efficient Frontier-----------------------------------------------------------------------------Page 13 Calculated Beta and Comparison with Market Beta-------------------------------------Page 14 Required Return using CAPM--------------------------------------------------------------Page 15 Conclusion---------------------------------------------------------------------------------------------Page 16 Bibliography------------------------------------------------------------------------------------------Page 17 Introduction This project was conducted to analyze various theories of portfolio analysis. A portfolio of 10 companies, that was enlisted in the DSE and traded for at least 10 years, was selected. Through this project we found out the Holding Period Return, the Arithmetic Mean and the Standard Deviation of these 10 companies. After that we calculated the correlation coefficient, covariance of these stocks and also of the Dhaka Stock Exchange Index (DSEX).Then using the Markowitz Model we found out the portfolio risk and return and used the information to make an efficient frontier. Finally we found out the Beta of each stock using regression analysis and compared it to the available......

Words: 3417 - Pages: 14

Premium Essay

Fixed Income Investment

... FINC3017 Investments and Portfolio Management Essay: Market Efficiency and Anomalies Topic:Stock price momentum: Jegadeesh and Titman (1993) Momentum anomaly and EMH Anomaly is a stock return deviation that challenge efficient market hypothesis (EMH). Jegadeesh and Titman (1993) theorise price momentum anomaly in the stock market for the first time. It contradicted to efficient market hypothesis thereby is widely debated. EMH states that no consistent excess return can be achieved since security prices fully reflect all available information (Fama 1970). Therefore, future prices cannot be predicted through technical analysis of past prices. If the hypothesis is true, passive investment strategy ought to be taken, because it is impossible to get abnormal return by aggressive trading. However, Jegadeesh and Titman show that stocks performed well over the previous 3 to 12 months tend to continue to perform well over 3 to 12 months holding periods. Buy past winners and short past losers earned statistically significant positive return of averaging 12.01% per year. Predictable price patterns and excess returns contradict the efficient market hypothesis. Investors and fund managers perform actively in pursuing abnormal profits. Literature review and the reason of anomaly A large number of literatures illustrate that momentum anomaly exist. Some important literatures are Chan, Jegadeesh and Lakonishok (1996), Conrad and Kaul (1998) and Moskowitz and Grinblatt (1999). Lee and......

Words: 1632 - Pages: 7

Premium Essay

Fixed Income Homework

...What is the effective annual rate that corresponds to a nominal interest rate of 6% with semi-annual compounding? (1+0.03)^2-1=6.09% (c) Price a zero coupon bond with a face amount of $1000 maturing in 7 years. Assume that the nominal interest rate is 6% and interest is compounded semiannually. Fv=1000,i/y=3,n=14,pv=661.12 (d) Assume now that interest rates have instantaneously increased by 1% to 7%. What are the bonds in parts (a) and (c) worth now? Fv=1000, i/y=3.5, pmt= 25, n=14, pv=890.79 Fv=1000,i/y=3.5, n=14, pv= 617.78 Total return and yield measures 1. Assume a bondholder purchased at par an initial issue of bonds and held them to maturity. Over the maturity, the interest rates rose at which the coupons income was invested. Compare the realized return to the yield to maturity of bond at the time of purchase: B a. Realized return greater than YTM b. Realized return equal to YTM c. Realized return less than YTM d. Cannot infer from given information 2. XYZ Corp issues two bonds with 30-year maturities both of which are callable at $1100. The first bond is a deep discount bond issued at $500 has a coupon rate of 5% (semi-annual payments) and a yield to maturity of 7.4%. The other bond is issued at par value and its coupon rate is 8.6%. e. Find yield to maturity for second bond. If market rates are expected to fall drastically over time, which bond would investors prefer to hold? Why? i/y=8.6,......

Words: 1493 - Pages: 6

Premium Essay

Fixed Income: Asset Liability Management

...are in years) and the summation is over all occurrences of cash flows. • Excel provides the function DURATION to compute the Macaulay duration and the function MDURATION to compute the modified duration. The bond is assumed to be redeemable at par. The specifications of these functions are given as follows: 16 Excel functions: DURATION/MDURATION(smt,mty,crt,yld,frq,basis) smt = settlement date mty = maturity date crt = coupon rate of interest per annum yld = annualized bond yield frq = number of coupon payments per year basis = day count, 30/360 if omitted (or set to 0) and actual/actual if set to 1 Output = Macaulay/modified duration of the bond in years • Exhibit 8.1 illustrates Examples 8.1 through 8.4. We have arbitrarily fixed the settlement date to be January 1, 2001, and the maturity date is then entered based on the given time to maturity of the bond. 17 8.2 Duration for Price Correction • We now consider the use of the modified duration to approximate the price change of a bond when the rate of interest changes. • We denote P (i) as the price of a bond when the yield to maturity is i per coupon-payment period. • When the rate of interest changes to i +∆i, the bond price is revised to P (i + ∆i). • While the bond price can be re-calculated at the rate of interest i+∆i using one of the pricing formulas in Chapter 6, an approximation is available using the modified duration. • For a continuous function f (x) with first- and second-order......

Words: 7983 - Pages: 32

Premium Essay

Fixed Income Security

...© CSI GLOBAL EDUCATION INC. (2011) 7•1 Chapter 7 Fixed-Income Securities: Pricing and Trading © CSI GLOBAL 7•2 EDUCATION INC. (2011) 7 Fixed-Income Securities: Pricing and Trading CHAPTER OUTLINE How are Price and Yield of a Bond Calculated? • Calculating the Fair Price of a Bond • Calculating the Yield on a Treasury Bill • Calculating the Current Yield on a Bond • Calculating the Yield to Maturity on a Bond What is the Term Structure of Interest Rates? • The Real Rate of Return • The Yield Curve What are the Fundamental Bond Pricing Properties? • The Relationship Between Bond Prices and Interest Rates • The Impact of Maturity • The Impact of the Coupon • The Impact of Yield Changes • Duration as a Measure of Bond Price Volatility What are Bond-Switching Strategies? How does Bond Market Trading Work? • Clearing and Settlement • Calculating Accrued Interest © CSI GLOBAL EDUCATION INC. (2011) 7•3 What are Bond Indexes? • Canadian Bond Market Indexes • Global Indexes Summary LEARNING OBJECTIVES By the end of this chapter, you should be able to: 1. Defi ne present value and the discount rate, and perform calculations relating to the time value of money, bond pricing and yield. 2. Defi ne a real rate of return and a yield curve, and evaluate three theories of interest rate determination. 3. Analyze the impact of fi xed-income pricing properties on bond prices. 4. Explain the rationale for bond switching and describe bond-switching......

Words: 11227 - Pages: 45

Free Essay

Fixed Income Portfolio Management

...Fixed-Income Portfolio Selection Kay Giesecke∗ and Jack Kim† Stanford University June 29, 2009; this draft January 11, 2012‡ Abstract The equity portfolio selection problem is the subject of a substantial literature. Though equally important in practice, the selection problem for a fixed-income portfolio of corporate and government bonds, industrial loans and credit derivatives, is less well-understood. The fixed-income portfolio problem presents unique challenges: the risk of issuer default induces skewed return distributions, the correlation of defaults influences the tail of the portfolio return distribution, and credit derivative positions have complex risk/return implications. This paper addresses the static selection problem for a fixed-income portfolio. We optimize the total mark-to-market value of the portfolio at the investment horizon. This value incorporates the intermediate premium and default cash flows of long and short cash and derivative positions, and the survival-contingent market value of these positions at the horizon. The selection problem is cast as a polynomial goal program that involves a two-stage constrained optimization of preference weighted moments of the portfolio mark-to-market. The decision variable is the vector of contract notionals. A capital constraint guarantees the solvency of the investor. The multi-moment formulation addresses the non-Gaussian distribution of the portfolio mark-tomarket. It is also computationally tractable, because we......

Words: 19189 - Pages: 77