Fixed Income Trading, Investing and Hedging
Dates:
October 13 - 15, 2008
October 13 - 15, 2008
Location:
Prague, Mövenpick Hotel
Prague, Mövenpick Hotel
Price:
EUR 1,950
EUR 1,950
Lecturer:
Søren Plesner
Søren Plesner
- Trading the Yield Curve
- Portfolio Strategies
- Arbitrage and Relative Value Strategies
- Currency Hedged Strategies
- Investing in Bond-Backed Structures
- Using Derivates in Fixed Income Trading
- Credit Correlation Trades
- Investing in Corporate and Emerging Market Bonds
The objectives of this seminar are to present a number of advanced bond trading, investing and hedging strategies and to give you a good understanding of how to effectively implement these strategies in practice.
After a brief review of yield curve analysis we explain and demonstrate how different views about the level and shape of the yield curve can be exploited through repo trading, “tailing”, yield spread trades, flatteners/steepeners, dumbbells/bullets, butterfly trades, etc.
Next, we look at selected arbitrage and relative value trades, including on-the-run/off-the-run trades, Treasury/Corporate spreads, investment-grade/high yield, convertible arbitrage, and international bond spreads with various currency hedging strategies.
We then explain the role of futures and other derivative instruments in trading, hedging and portfolio management. We explain the link between the cash and futures markets and demonstrate how “Basis Trades” and “Futures Spread Trades” can be constructed to exploit market mispricings - or to implement differing views on interest rates. We also show how futures/options/swaps can be used effectively to implement “Directional” bets or “Sector Switching”.
Further, we explain the concepts of “Strips”, “Collaterized Mortgage Obligations”, “Collaterized Debt Obligations” and other types of bond derivative structures, and we discuss the opportunities and risks of investing in these products. We also explain and demonstrate how to implement “correlation trades” using CDO’s, and/or single-name, basket, and index CDS.
Finally, we look at techniques for investing in investment grade bonds, high yield corporate bonds and emerging markets bonds. Investment techniques in this area include the use of portfolio diversification techniques, “Asset Swaps”, securitization, and credit derivatives.
After a brief review of yield curve analysis we explain and demonstrate how different views about the level and shape of the yield curve can be exploited through repo trading, “tailing”, yield spread trades, flatteners/steepeners, dumbbells/bullets, butterfly trades, etc.
Next, we look at selected arbitrage and relative value trades, including on-the-run/off-the-run trades, Treasury/Corporate spreads, investment-grade/high yield, convertible arbitrage, and international bond spreads with various currency hedging strategies.
We then explain the role of futures and other derivative instruments in trading, hedging and portfolio management. We explain the link between the cash and futures markets and demonstrate how “Basis Trades” and “Futures Spread Trades” can be constructed to exploit market mispricings - or to implement differing views on interest rates. We also show how futures/options/swaps can be used effectively to implement “Directional” bets or “Sector Switching”.
Further, we explain the concepts of “Strips”, “Collaterized Mortgage Obligations”, “Collaterized Debt Obligations” and other types of bond derivative structures, and we discuss the opportunities and risks of investing in these products. We also explain and demonstrate how to implement “correlation trades” using CDO’s, and/or single-name, basket, and index CDS.
Finally, we look at techniques for investing in investment grade bonds, high yield corporate bonds and emerging markets bonds. Investment techniques in this area include the use of portfolio diversification techniques, “Asset Swaps”, securitization, and credit derivatives.
13.00 - 16.30 Portfolio Strategies
- Portfolio Barbells
- Portfolio “Butterflies”
- Credit Barbells
- Immunized Portfolios
- Traditional immunization (single-factor)
- Multifactor-immunization
- Strategies Based Upon “Key Rate Duration”
- Laddered Portfolios
- Why laddered portfolios can outperform other bond strategies
- Building a portfolio of bonds with staggered maturities
- Maintaining the ladder through reinvestments
- Exercises
Tuesday, October 14
09.00 - 09.15 Recap
09.15 - 12.00 Arbitrage and Relative Value Strategies
- Identifying and Exploiting Arbitrage Opportunities through “Cheap/Rich” Analysis
- On-the-Run/Off-the-Run Trades
- Case study: LTCM
- Sector Switches
- Domestic and international
- OA Analysis and Mortgage Bond Arbitrage
- Convertible Arbitrage
Currency Hedged Strategies
- Sources of Return on Foreign Bonds
- Unhedged Foreign Bond
- Cash Flow Hedged Foreign Bond
- Present Value Hedged Foreign Bond
- Cross Hedged Foreign Bond
- Proxy Hedged Foreign Bond
- Exercises
12.00 - 13.00 Lunch
13.00 - 16.30 Investing in Bond-Backed Structures
- Treasury Strips
- “STRIPS” and “RECONS”
- Mortgage Strips
- IO/PO strips
- Known collateral strips
- TBA strips
- Story strips
- Collaterized Mortgage Obligations
- Inverse Floaters
- Collaterized Bond Obligations
- Balance sheet CBO’s
- Arbitrage CBO’s
- Credit correlation trades
- Exercises
Wednesday, October 15
09.00 - 09.15 Recap
09.15 - 12.00 Using Derivates for Fixed-income Trading, Investing and Hedging
- Advantages and Disadvantages of Using Derivates
- Using Futures in Bond Trading and Hedging
- Outright trades and basis trades
- Calendar spreads (straddles)
- Intermarket spreads
- Hedging single positions and portfolios
- Dynamic portfolio hedging
- Using Options in Bond Trading and Hedging
- Directional and volatility trading
- Using “Quanto” options to hedge dynamic currency risk etc.
- Using Swaps and other Derivatives
- Creating synthetic, capped and floored cash flows
- Exercises
12.00 - 13.00 Lunch
13.00 - 16.30 Investing in Corporate and Emerging Market Bonds
- Investment Grade vs. High-Yield Bonds
- Understanding the Credit Risk of Corporate Bonds
- Credit Spreads and Credit Curves
- Calculating the Fair Credit Spread
- Using Asset Swaps and Credit Derivatives
- Hedging or leveraging credit risk
- Shorting credit risk
- Creating synthetic corporate bonds
- Investing in Distressed Debt
- Investing in Emerging Market Bonds
- Opportunities, risks and strategies
- Exercises
Evaluation and Termination of the Seminar
