For well over a decade interest rates have been trading at ultra low and even negative levels. It would seem likely that at some stage interest rates will rise, resulting in a fall in bond rices. This course considers some of the tactics that could be used to hedge the associated market and credit risk of a fixed income portfolio.
The course first considers how yield curves move and how they are impacted by central bank activity. This analysis highlights 2-3 active strategies that can be used to exploit the likely change in the slope and curvature of the yield curve. The next part of the course considers how the market risk of a portfolio could be hedged using a variety of fixed income derivatives including interest rate swaps, bond futures and short-term eurodollar futures. The course also looks at how portfolio credit risk could be hedged using single name and index default swaps.