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Bond-Related Derivatives

In: Derivatives Applications in Asset Management

Author

Listed:
  • Frank J. Fabozzi

    (Johns Hopkins University’s Carey School of Business)

  • Marielle Jong

    (Grenoble Ecole de Management)

  • Mounia Khamlich Fischer

    (Assurances du Crédit Mutuel)

Abstract

Bond-related derivatives, including futures, forwards, swaps, and options, are indispensable tools for managing risk and optimizing portfolio performance in fixed-income markets. This chapter provides a comprehensive overview of these instruments, focusing on their structures, mechanics, and applications. Interest rate futures, such as U.S. Treasury and Euro-Bund futures, offer solutions for managing duration and hedging interest rate risks. Forward rate agreements (FRAs) enable locking in future interest rates, while swaps—including interest rate, inflation, and credit default swaps (CDS)—address exposure to specific risks. Options on fixed-income instruments, such as swaptions and caps/floors, add flexibility in handling rate volatility and customized hedging. By understanding these tools, portfolio managers can effectively navigate interest rate fluctuations, hedge credit risks, and enhance returns within a dynamic and evolving bond market.

Suggested Citation

  • Frank J. Fabozzi & Marielle Jong & Mounia Khamlich Fischer, 2025. "Bond-Related Derivatives," Springer Books, in: Frank J. Fabozzi & Marielle de Jong (ed.), Derivatives Applications in Asset Management, chapter 0, pages 43-66, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-86354-7_3
    DOI: 10.1007/978-3-031-86354-7_3
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