Treasury returns resulting from yield curve movements, Financial Management

Robert Litterman and Jose Scheinkman were the first to study how changes in the shapes of the yield curve affect the total return on the Treasury securities. The historical returns can be explained using three factors: the changes in the level of rates, changes in the slope of the yield curve, and the changes in the curvature of the yield curve. The first factor is the largest contributing factor for the change in treasury returns. Therefore, the managers of treasury portfolios should control the exposure to changes in the level of interest rates. Duration measure can be used to quantify such risks. The second factor is the next largest contributor to the change in returns. However, the second factor is only 1/10 as significant as the first factor. The third factor contributes very little to the changes in returns.

Posted Date: 9/10/2012 3:27:23 AM | Location : United States







Related Discussions:- Treasury returns resulting from yield curve movements, Assignment Help, Ask Question on Treasury returns resulting from yield curve movements, Get Answer, Expert's Help, Treasury returns resulting from yield curve movements Discussions

Write discussion on Treasury returns resulting from yield curve movements
Your posts are moderated
Related Questions
You have recently won the UniSA "log tossing" competition. The prize of $200 is supposed to be used to buy a 50-year subscription to "Log News" This appears to represent a consid

Q. Major Risk Return Decision Areas? 1) Financial Analysis and Control: This area is concerned with the Financial Statements, i.e. Income Statement, Balance Sheet, Funds Flow S

Explain about the Valuing Securities Objective of any investor is to maximise expected returns from his investments, subject to various constraints, primarily risk. Return is m

Bid The price buyers provide to acquire securities or privacy from sellers.

Review of career plans: career plans, emerging out of career planning exercise, have long term orientation. A career plan is developed based on assumptions about how the environmen

Provide three examples of mutually exclusive projects. Mutually elite projects are projects that compete against each other for our selection.  If a firm were considering the b

Peak Inc. needs to order Canadian raw materials to use in its production process. The Canadian exporter typically invoices Peak in Canadian dollars. Assume that the current exchang

In the NPV analysis, sunk cost is not relevant whereas opportunity cost is for project evaluation. Requirements: Explain and justify the above statement about sunk cost and

FUNCTIONAL AREAS OF FINANCIAL MANAGEMENT The scope of financial management is all pervasive and covers approximately all the functional areas of an organization. A number of t

Under write An arrangement under which the investment banks agree to purchase a certain amount of privacy of a new issue (typically an IPO) at a given date for a given pric