Trading Strategies In Bond Markets

Inhaltsverzeichnis (Table of Contents)

• Abbreviations & Symbols
• Preface
• An Overview of Bonds
  • Bond Prices and The Yield Curve
  • Forces Driving Bond Prices
• Arbitrage-free Yield Modelling
  • General Concepts
  • The Heath-Jarrow-Morton Model
  • The Time Discrete Heath-Jarrow-Morton Model
  • Empirical Quality of the Time Discrete HJM Model
• Parametric Yield Curve Estimation
  • The Dynamic Nelson-Siegel Method
  • Shortcomings of the Dynamic Nelson-Siegel Method
  • Empirical Quality of the DNS Method
• Portfolio Optimization
  • Optimal Portfolio with Regards to Conditional Value at Risk
  • Efficient Implementation
  • Example of Optimal Portfolios

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This work focuses on developing trading strategies for government bonds. It introduces two approaches to yield curve prediction, an arbitrage-free model and a parametric estimation method. The performance of these methods is analyzed and compared in the context of US Treasury bonds. Additionally, the concept of portfolio optimization with respect to conditional value at risk is explained and two methods for its efficient implementation are presented. Finally, the study demonstrates how yield curve estimations can be integrated into portfolio optimization to generate trading strategies.

• Arbitrage-free yield curve prediction
• Parametric yield curve estimation
• Portfolio optimization with conditional value at risk
• Application of yield curve estimations in trading strategies
• Comparison of different methodologies for bond market analysis

Zusammenfassung der Kapitel (Chapter Summaries)

• Chapter 2: An Overview of Bonds This chapter provides an introduction to the bond market, defining basic concepts like bond prices, yield curves, and the factors influencing bond prices.
• Chapter 3: Arbitrage-free Yield Modelling This chapter delves into the theory of arbitrage-free yield curve modeling, focusing on the Heath-Jarrow-Morton (HJM) model. The chapter presents the model in both its continuous and discrete time formulations and examines its empirical performance for US Treasury bonds.
• Chapter 4: Parametric Yield Curve Estimation Chapter 4 introduces the dynamic Nelson-Siegel (DNS) method, a parametric approach to yield curve estimation. It discusses the strengths and limitations of this method and assesses its empirical accuracy when applied to the US Treasury yield curve.
• Chapter 5: Portfolio Optimization This chapter explores the concept of portfolio optimization with respect to conditional value at risk (CVaR). It examines two efficient implementations of CVaR-based portfolio optimization: smoothing techniques and the Nesterov procedure. The chapter concludes with an example of optimal portfolios derived using these techniques.

Schlüsselwörter (Keywords)

Government bonds, yield curve prediction, arbitrage-free model, Heath-Jarrow-Morton model, parametric estimation, dynamic Nelson-Siegel method, portfolio optimization, conditional value at risk, trading strategies, US Treasury bonds.