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Hedging and Replication of Fixed-Income Portfolios LEV DYNKIN, JAY HYMAN, AND lance LINDNER The Journal of Fixed Income 2002.11.4:43-63. Downloaded from www.iijournals.com by gaurav verma on 09/15/12. It is illegal to make unauthorized copies of this article, frontward to an unauthorized customr or to post electronically without publication house permission. LEV DYNKIN is a managing director at Lehman Brothers in au naturel(predicate) York. ldynkin@lehman.com JAY HYMAN is a senior vice president at Lehman Brothers in Tel Aviv, Israel. jhyman@lehman.com PETER LINDNER is a vice president at Lehman Brothers in New York. lindner@lehman.com ecent deposit markets contrive been characterized by unprecedented short-circuit widen and spread volatility. There be substantially to a greater extent fixed-income derivative instruments traded, and they are more(prenominal) liquid. Phenomenal growth in the Eurodollar futures and the swaps markets and the introduction o f exchange-traded derivative contracts on swaps allow investors to much more easily douse the jeopardize of a bond portfolio heart-to-heart to spread adventure. Derivatives have been widely employ in monetary hedgerow applications for decades now. almost studies analyze the relationship between accredited fixed-income derivatives and specific securities, management on the mechanics of hedging operations.

1 Empirical research looks in the main at the denseness of the relationship between equity markets and equity derivatives.2 We examine the use of derivatives in the more general mise en scene of hedging and replication of diversified fixed-income ! portfolios. In hedging, derivatives are used to toss off some or all of the systematic risk exposures of bond portfolio or liability cast. Hedging activities can stipulate the risk profile of an asset or liability position in order to realize a profit from a perceived undervaluation of a portfolio, or to neutralize shocks expected to wedge the portfolio in the future. The goal of index replication is to achieve returns intimately equivalent to those of a targeted benchmark...If you want to get a full course of the moon essay, order it on our website: OrderCustomPaper.com

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