EC3314 – Financial Economics Spring 2015
Due Date: March 12th 2015, via Turnitin.
The Yield Curve Kink Decision
(12.5% weight of final grades)
Read the case study, ‘Greydanus, Broekh and Associates: The Yield Curve Kink Decision’. The case introduces a variety of issues in bond portfolio management including bond portfolio benchmarks, understanding the importance of changing economic factors and barbell strategies.
Write a 750–1,000 word analytical report on Greydanus, Broekh and Associates (GBA)’s portfolio management style. In the report, you will need to
• assess GBA’s performance,
• comment on their investment strategy,
• assess the outlook for interest changes,
• underline the key relationships between yields and bond prices, and comment on the usefulness of duration’
• In particular, analyze the ‘Porsche’ bond, and demonstrate how its duration and convexity are calculated at end of June 1997 (given that the first coupon payment to be considered occurs in two months, at the beginning of September 1997).
PS: Make your presentations neat, concise and clear. Avoid long and complicated sentences. A good report will be one that has been able to sift through the vast amount of information and present only what is necessary and important. Good luck!