Hedging Corporate Bonds
We examine Treasury bond and stock index futures, the swap curve and two types of hypothetical corporate bond assets as alternative hedging instruments for portfolios of corporate bonds. Conducting "ex post" and "ex ante" tests we find evidence that credit quality and maturity are important sources of basis risk when hedging corporate bonds whose credit rating are below triple A. We conclude that a new corporate hedging instrument may be useful for those wishing to hedge corporate bond portfolios provided that transaction costs are not too high relative to existing futures contracts. Copyright Blackwell Publishers Ltd 1999.
Year of publication: |
1999-09
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Authors: | Ioannides, Michalis ; Skinner, Frank S. |
Published in: |
Journal of Business Finance & Accounting. - Wiley Blackwell, ISSN 0306-686X. - Vol. 26.1999-09, 7&8, p. 919-944
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Publisher: |
Wiley Blackwell |
Saved in:
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