Please enable JavaScript.

Coggle requires JavaScript to display documents.

CHAPTER 8, :<3:refers to the approaches that are applied for the…

- - - - . Interest Rate Participation
        
        :smiley:It is a most important factor in the pricing of bonds. it involves moving between long-term government bonds and very short-term treasury bills, based on a forecast of interest rates over a certain time horizon, to provide the maximum increase in price for a portfolio..
      - Valuation analysis
        
        :smiley:it refers to the portfolio managers attempt to select bonds based on their intrinsic value.
      - . Credit analysis
        
        :smiley:credit analysis strategy evaluates corporate or foreign bonds to anticipate potential changes in credit risk whoch will usually result in changes in the issuers' bond prices.
      - Yield spread analysis
        
        :smiley:A yield spread strategy is a method of taking advantage of the yield spread of a specific bond.
        It encourages placing a short position on a bond with a low yield, while at the same time placing a long position on a bond with a high yield.
      - . Bond swaps
        
        :smiley:Investor chooses to sell a bond and simultaneously purchase another bond with the proceeds from the sale.in order to take advantage of current market and/or tax conditions and better meet your current investment objectives.
    - - Buy-and-hold
      - Indexed approach
        
        :pencil2:.
        
        investors can use this to achieve greater returns with lower expenses rather than matching cash flows with liabilities or duration of bond with liabilities The main objective of indexing a bond portfolio is to provide a return and risk characteristic closely tied to the targeted index
  - - - Fundamental Strategies
        
        :<3:It refers to the 'Top Down' approach and 'Bottom Up' approach where refer the strategic for managing equity to analyze and choose securities.
        :star:Top Down- economy-sector-specific industry.
        :star:Bottom Up- Investors focus his intention on specific company rather that on the industry in which company operates or on the economy as a whole.
      - Technical Strategies
        
        :<3:It helps investors to determine equity through
        :silhouette: Contrarian investment strategy - Base other belief that the best time to a stock is when the majority other investors are the most bearish or bullish.
        :silhouette: Price momentum strategy- use historical price t predict what happen in the future
      - Anomalies & Attributes
        
        Market anomalies can be great opportunities for investors.
        :<3:Earning momentum strategy - momentum is measured by different of actual EPS to expected EPS. purchases stocks that have accelerating and sells stocks with disappointing earnings.
        :<3:also have calendar-related anomalies- the weekend effect /the January effect.
    - - Full Replication
        
        :recycle:all securities in the index are purchased in proportion to weights in the index. it helps ensure close tracking.
        Increase transaction costs, particularly with dividend reinvestment
      - Sampling
        
        :check: Buys a representative sample of stocks in the benchmark index according to their weight in the index.
        :check:fewer stock means lower commission.
      - Quadratic Optimization Strategy
        
        :no_entry:refers to the Historical information on prices changes & correlation between securities are input into computer program that determine composition of portfolio that will minimize tracking error with the benchmark.