Bonds and Hedging Strategies for Bond Portfolios


  • The bond market is extremely large and diverse. The scale and complexity of this market has increased in recent years, bringing new opportunities and risks to the marketplace. In addition to conventional investment strategies, portfolio managers are increasingly using hedging strategies to hedge their fixed income portfolios.

Course objectives

The objective of the workshop is to provide participants a comprehensive overview of different fixed income securities, the characteristics of bonds, bond market conventions and bond valuations. We will then explain methods for measuring interest-rate risk. We will present and explain concepts such as duration and convexity, and we will also demonstrate how interest-rate risk can be assessed at the portfolio level. After a brief review of yield curve analysis, we will explain and demonstrate how different views about the level and shape of the yield curve can be exploited. Finally, we will explain the role of futures and swaps in trading and hedging. Practical tips for hedging bond portfolios against interest-rate risk will also be given.

Who should attend

  • bond traders
  • portfolio managers
  • bank & corporate treasury staff
  • treasury sales
  • treasury dealers & traders
  • auditors and product control
  • risk management, accounting and ALM
  • finance staff at corporations
  • back office personnel

Teaching methodology

    The workshop comprises a combination of lectures, discussions, case studies and practical workshops. It is intended for participants without practical experience on debt capital markets. Traders and portfolios managers who are already engaged in trading with bonds will learn several new techniques for hedging their portfolios during the second part of the workshop. In addition to the theoretical basics, participants will find interesting solutions for their day-to-day work. Individual topics will quickly and intensely move from the basics of bonds to the operational aspects of portfolio hedging. Equal attention will be given to theoretical concepts and practical applications. Participants are requested to bring a financial calculator (HP 17B or similar) for calculations in practical examples and exercises.

  • Course description

    Date: 20-21 February 2020

    Venue: Budapest, Danubius Grand Hotel Margitsziget

    The workshop is held in the English language.

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  • Course contents

    • Introduction to bonds
    • What is a bond?
    • Who are the issuers and who are investors in bonds?
    • Risks associated with investing in fixed income securities
    • Characteristics of bonds
    • Classification of bonds
    • Issue and settlement of bonds
    • Bond trading
    • Fundamentals of investing
    • The role of credit rating agencies
    • Bond pricing
    • Conventional yield measures
      • coupon yield
      • current yield
      • yield to maturity
    • Traditional approach to bond valuation
      • relationship between coupon rate and current yield
      • valuing a bond between coupon payments
      • calculating the dirty price
      • calculating accrued interest
      • calculating the clean price
    • Yield curves
      • ploting the yield curve
      • yield curve theories
      • credit spreads
    • Arbitrage free bond valuation
      • bootstrapping
      • theoretical spot rate
    • Measuring interest-rate risk
      • price volatility characteristics of bonds
      • duration
      • convexity
    • Introduction to fixed income derivatives
      • fundamentals of hedging
      • mechanics of hedging
      • bond futures contracts
      • interest rate swaps
    • Hedging bond portfolio interest-rate risk with
      • government bonds
      • bond futures and
      • interest rate swaps