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Active currency management of international bond portfolios

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  • Gueorgui Konstantinov

Abstract

This paper focuses on the estimation and implementation of a holistic quantitative yield-curve-based approach to managing multi-currency bond portfolios. The primary task of the presented model is to manage the portfolio risk and return by exploiting inefficiencies in the emergent complexity of both currency and bond markets to generate alpha. Instead of using proxy variables, the expected return and risk parameters are estimated directly using their underlying simplicity and connectivity, period by period at specific moments in time, thus generating time diversification with aggressive risk taking and positioning. As a result, the strategies described in this paper can be classified as both alpha hunters and generators. Copyright Swiss Society for Financial Market Research 2014

Suggested Citation

  • Gueorgui Konstantinov, 2014. "Active currency management of international bond portfolios," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 28(1), pages 63-94, February.
    • Handle: RePEc:kap:fmktpm:v:28:y:2014:i:1:p:63-94
    DOI: 10.1007/s11408-013-0223-8
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    References listed on IDEAS

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    4. Unknown, 2005. "Forward," 2005 Conference: Slovenia in the EU - Challenges for Agriculture, Food Science and Rural Affairs, November 10-11, 2005, Moravske Toplice, Slovenia 183804, Slovenian Association of Agricultural Economists (DAES).
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    More about this item

    Keywords

    Fixed income; Currencies; Portfolio management ; Quantitative models; F31; G1; G15;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G1 - Financial Economics - - General Financial Markets
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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