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dc.contributor.authorKrippner, Leo
dc.date.accessioned2008-12-15T02:56:17Z
dc.date.available2008-12-15T02:56:17Z
dc.date.issued2005-03
dc.identifier.citationKrippner, L. (2005). Attributing returns and optimising United States swaps portfolios using an intertemporally-consistent and arbitrage-free model of the yield curve. (Department of Economics Working Paper Series, Number 3/05). Hamilton, New Zealand: University of Waikato.en_US
dc.identifier.urihttps://hdl.handle.net/10289/1646
dc.description.abstractThis paper uses the volatility-adjusted orthonormalised Laguerre polynomial model of the yield curve (the VAO model) from Krippner (2005), an intertemporally-consistent and arbitrage-free version of the popular Nelson and Siegel (1987) model, to develop a multi-dimensional yield-curve-based risk framework for fixed interest portfolios. The VAO model is also used to identify relative value (i.e. potential excess returns) from the universe of securities that define the yield curve. In combination, these risk and return elements provide an intuitive framework for attributing portfolio returns ex-post, and for optimising portfolios ex-ante. The empirical applications are to six years of daily United States interest rate swap data. The first application shows that the main sources of fixed interest portfolio risk (i.e. unanticipated variability in ex-post returns) are first-order (‘duration’) effects from stochastic shifts in the level and shape of the yield curve; second-order (‘convexity’) effects and other contributions are immaterial. The second application shows that fixed interest portfolios optimised ex-ante using the VAO model risk/relative framework significantly outperform a naive evenly-weighted benchmark over time.en_US
dc.format.mimetypeapplication/pdf
dc.language.isoen
dc.relation.ispartofseriesDepartment of Economics Working Paper Series
dc.subjectyield curveen_US
dc.subjectterm structureen_US
dc.subjectfixed interest securitiesen_US
dc.subjectportfolio optimisationen_US
dc.subjectinterest rate swapsen_US
dc.titleAttributing returns and optimising United States swaps portfolios using an intertemporally-consistent and arbitrage-free model of the yield curveen_US
dc.typeWorking Paperen_US
uow.relation.series3/05


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