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Abstract
This article provides a unified and coherent treatment of the relation between the analytical and empirical duration of corporate bonds based on theoretical and empirical evidence. It examines several possible explanations for the large decline in interest rate sensitivity when crossing from investment-grade to high-yield territory. We discuss several practical applications of using empirical duration to hedge the interest rate exposure in credit portfolios and express views on the direction of interest rates.
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- Article
- Abstract
- EMPIRICAL DURATION: THEORY AND EVIDENCE
- THE RELATION BETWEEN ANALYTICAL AND EMPIRICAL DURATION
- ESTIMATION METHODOLOGY AND EMPIRICAL ANALYSIS
- SEGMENTATION IN CREDIT MARKETS
- POTENTIAL STALE PRICING AND ITS EFFECT ON HEDGE RATIOS
- HEDGE RATIOS FOLLOWING RATING CHANGES: AN EVENT-STUDY APPROACH
- SUMMARY AND IMPLICATIONS FOR PORTFOLIO MANAGEMENT
- INDEX REPLICATION WITH DERIVATIVES
- ASSET-LIABILITY MANAGEMENT FOR PENSION FUNDS
- HEDGING AN ACTIVE CREDIT EXPOSURE
- CORE-PLUS INVESTMENT IN HIGH-YIELD BONDS
- ENDNOTES
- REFERENCES
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