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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, forth to an unauthorized mappingr or to post electronically without make house permission. LEV DYNKIN is a managing director at Lehman Brothers in sensitive 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 seize markets contrive been characterized by unprecedented open widen and spread volatility. There be substantially to a greater extent fixed-income derivative instruments traded, and they are more liquid. Phenomenal growth in the Eurodollar futures and the swaps markets and the introduction of exchange-traded derivative contracts on sw aps allow investors to much more easily douse the jeopardize of a bond portfolio playing area to spread try. Derivatives have been widely employ in pecuniary hedging applications for decades now. almost studies analyze the relationship between authoritative fixed-income derivatives and specific securities, management on the mechanics of hedging operations.

1 Empirical research looks in the main at the casualness 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 countermine 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 comprehend 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 equal to those of a targeted benchmark...If you want to get a full form of the moon essay, order it on our website: OrderEssay.net

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