Total Return Fixed-Income Portfolio Management

Abstract

The fixed–income portfolio strategy investigated here is designed to generate positive returns and be completely risk–based; it does not require any forecasts about future yield curve movements. The idea is to control the shortfall risk of a fixed–income portfolio dynamically, allowing portfolio managers to spend their available risk budgets flexibly (taking duration, yield curve, and credit positions). The total risk of the portfolio is adjusted on a daily basis to produce positive total returns (or a total return above a prespecified minimum–return threshold).