Fixed Income Portfolio Management & Construction
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The Fixed Income Portfolio Management and Construction class introduces the tools and techniques for the management of fixed income portfolios, applying those techniques first to analysing portfolios of real bonds and then to construction and management of portfolios.
It builds on the mechanics of Fixed Income (as found, for example, in ICMA's Fixed Income Certificate (FIC) and applies them in the context of investment portfolios, considering how classic (equity) portfolio theory must be adapted to apply to fixed income and the many issues impacting risk and return of fixed income portfolios.
These issues are illustrated using examples from a real portfolio risk management system, enabling delegates to analyse their portfolios - including exposure analyses, tracking error and risk reports and attribution of performance vs benchmarks.
Learning Outcomes
By completing the course you will be able to:
- Understand the technicalities of analysing fixed income portfolios
- Explain the drivers of performance of fixed income portfolios and how they affect investment outcomes
- Express views on future interest rates and credit spreads by taking positions in fixed income instruments
- Apply intuition to levels of tracking error utilised by active risk positioning
- Explain how single name credit is aggregated into aggregate risk distributions for fixed income portfolios
- Understand the principles of portfolio construction vs benchmarks and vs liability benchmarks
- Interpret and explain performance attribution for fixed income portfolios
- Use derivatives in portfolio construction – futures, swaps, swaptions, inflation swaps, single name and index CDS
- Explain application of ESG factors in fixed income portfolio construction
Who should attend?
The class is aimed at those with exposure to fixed income products who want better understanding of their application in a portfolio management context, including junior PMs / desk assistants, investment specialists, product managers, sales teams, researchers and economists.
Candidates should have basic quantitative skills and understanding of the basic features of fixed income instruments. See Content tab for areas of the ICMA's FIC that would be useful to know coming in to the class.
Certification and Programme Recognition
ICMA is a member of the CPD® Certification Service, an FCA-approved qualifications provider and approved by the Securities & Futures Commission of Hong Kong as provider of Continuous Professional Training (CPT).
This course is certified by ICMA and the ICMA Centre, Henley Business School, University of Reading.
ICMA recommends that 30 learning hours can be associated with this course, based on attended/undertaken hours of study required to successfully complete the learning outcomes.
A Certificate of Attendance will be awarded to those who meet the minimum attendance requirements for this course.
Please note that your course certificate of attendance or completion should be sufficient to satisfy any professional development requirements – if you require further evidence, please contact us at education@icmagroup.org.
- Fixed Income Investment
- Risk and return on Interest rates
- Carry as a driver of Performance
- Risk and return on Credit spreads
- Fixed Income portfolios – exposure analysis
- Fixed Income portfolios – volatility and tracking error
- Portfolio construction exercise
- Credit risk distributions, aggregation
- Credit Portfolio
- Techniques in portfolio construction
- Tools for controlling rate exposure
- Tools for controlling spread exposures
- Tools for controlling currency exposure
- Managing duration for liability matching
- Performance measurement and attribution for Fixed Income
- Ex-post performance & information ratios
Appendix: Pre-requisites (i.e. assume delegates have knowledge of - as taken from ICMA's Fixed Income Certificate or FIC)
1.1.1 Present and future value
1.1.2 Money market instruments
1.1.3 LIBOR and Euribor
1.1.4 Overnight interest rates
1.1.5 Bond prices and accrued interest
1.1.6 Bond price and yield
1.1.7 Zero-coupon yields and discount factors
1.1.8 Par yields and forward rates
1.3.1 Why interest rate risk matters
1.3.2 Basis point value (BPV)
1.3.3 Macaulay duration, modified duration and BPV
1.3.4 Calculating duration from BPV
1.3.5 Limitations of duration-based risk measures
1.3.6 Effective duration and convexity
1.3.7 Key rate duration and risk bucketing
2.2.1 Short-term interest rate futures and implied forward rates
2.2.2 Eurodollar futures contracts
2.2.3 STIR futures and interest rate risk
2.2.4 STIR futures prices and breakeven forward rates
2.2.7 Hedging with STIR futures
2.2.8 Forward rate agreements
2.3.11 Hedging interest rate risk with bond futures
2.4.1 What is a swap?
2.4.2 Swap cash flows
2.4.3 Interest rate risk in swaps
2.4.5 Swap spreads
2.4.6 Swap quotation
2.4.7 Using swaps: managing interest rate risk
2.4.8 Using swaps: trading views on interest rates
2.4.13 Swap DV01
3.1.1 Credit risk
3.1.2 Credit spreads
Additional FIC material which we will use in context:
1.1.9 Estimating a benchmark zero-coupon yield curve
1.1.10 Zero-volatility spreads (Z-spreads) and option-adjusted spreads (OAS)
1.2.4 Analysing yield curve movements
1.4.1 Carry and forward price
1.4.2 Forward breakeven price and yield
1.4.3 Roll-down and calibrating outright trades to the forward curve
1.4.4 Risk-weighted steepening and flattening trades
1.4.6 Curvature trades
1.6.5 Inflation-linked bond markets
1.7.3 Secondary markets
2.4.15 Asset swap margins
2.5.6 Option Greeks
1. Define and interpret key option price sensitivities or risk measures - delta only
2. Explain how these option risk measures are affected by changes in the degree of ‘moneyness’ of the option, the time to expiry and the volatility of the underlying asset
2.5.10 Options on interest rates: swaption
2.5.11 Interest rate option trading strategies
2.6.1 Callable bonds
2.6.4 Option-adjusted spreads
2.7.1 Zero-coupon inflation swaps
2.7.5 Trading inflation with zero-coupon inflation swaps
Livestreamed Course
ICMA courses are delivered via video conferencing accessed on our digital learning platform, using the most effective pedagogical approaches and incorporating interactive functions like virtual breakout rooms.
The Fixed Income Portfolio Management and Construction live sessions are delivered in six 3.5 hour sessions over the course of two weeks. You will be given access to the course materials before the live sessions, and will have access to those for a total of three months from the first session. During these three months you will have the option to keep working through the course materials at your own pace.
2024 Livestreamed course fees
ICMA Members: EUR 2,800 (VAT not applicable)
Non-members: EUR 3,600 (VAT not applicable)
Please note:
- All payments must be made in Euro.
Contact
Should you have any queries, please contact education@icmagroup.org
