AMC Wrote: ------------------------------------------------------- > derswap07, > > Thank so much for your help. For your response > regarding Reading 28~31: > 1. Reading 28, P29 : under 4.1.1.3 Determining the > Target return > > I agreed that , and I think that ITRR > (immunization target return rate of return, ie., > the total > return) will be greater than the YTM because > the horizon price will be lower if you > mean “market price at the inception” by horizon > price. > But CFAI text stated that ITRR will be less than > the YTM because of the “lower” > reinvestment retrun (and vice versa) in the > statement (whole paragraph) of : > . This is what confused me ! What you have to realize here is that total return comprises of price of the bond at investment horizon + reinvested coupon. In comparison, the price of the bond has a greater impact on total return than reinvestment rate ( total coupons reinvetsed). So, if price of the bond declines more than what is gained by the higher reinvestment rate, than total return will be lower. > > 2. Reading 30, P109 > > Can I say that the “unleveraged duration” of the > “equity” is 4.0 and the “leveraged > duration” of the “equity” is 11.50 ? It says that in the prargraph. > > On the other hand, would you response to my > questions posted on February 13, 2010 09:35PM > under this same message title ? What I feel from your questions at this point is that you need to study the fundamentals little further. I would advise you to read Fabozzi on this topic. He makes it very clear-I had to do that. Hope this helps.
AMC Wrote: ------------------------------------------------------- > derswap07, > > Thank so much for your response to my questions > posted on February 13, 2010 09:35PM. It seems that > we response to each other at the same time. > > Reading 28 : Dedication Strategies" (P25~44) > P29 : under 4.1.1.2 Rebalancing an Immunized > Portfolio > P30 : under 4.1.1.5 Dollar Duration and > Controlling Position > > Do you mean that we cannot change or rebalance > the “duration” of each bond without > adding a derivative position or replacing the > bond ? But with the passage of time / > change in rates, the duration of each bond will > change accordingly and to keep those > bonds in our portfolio, the DD of the asset > (i.e., the bond portfolio) shall be rebanced > so that the portfolio’s DD can be kept > synchronized (with the DD of some iabilities) ? > You got it > Your response to my other questions are very > helpful ! Thank you so much ! You are very welcome. It makes me think too.
derswap07 Wrote: -------------------------- > What I feel from your questions at this point is that you need to study the fundamentals > little further. I would advise you to read Fabozzi on this topic. He makes it very clear-I > had to do that. > > Hope this helps. derswap07, Would you please advise which book of Fabozzi these concepts made clear ? thanks again !
There is a book wriiten specifically for level3 FI. I would recommend it for you. I did go through it and found very useful. " Fixed Income Readings" for CFA program by Fabozzi.
" Fixed Income Readings" for CFA program by Fabozzi. This book is the most well written. It is way better than the notes. I remember enjoying a lot of the readings on fixed income products.