Faculty of Economics and Business Administration Publications Database

Total Return Fixed Income Management: A Risk-Based Dynamic Strategy

Herold, Ulf
Purschaker, Nader
Volume: 31
Number: 3
Pages: 32 - 43
Month: Spring
Link External Source: Online Version
Year: 2005
Abstract: The fixed–income portfolio strategy investigated here is designed to generate positive returns and be completely risk–based; it does not require any forecasts about future yield curve movements. The idea is to control the shortfall risk of a fixed–income portfolio dynamically, allowing portfolio managers to spend their available risk budgets flexibly (taking duration, yield curve, and credit positions). The total risk of the portfolio is adjusted on a daily basis to produce positive total returns (or a total return above a prespecified minimum–return threshold).