Study On The Risk Management Of Fixed Income Portfolios

Risk management of fixed income portfolio is one of the most important works in fixed income research and financial engineering. After reviewing the measurement of fixed income product risk and the evolving process of theories on term structure of interest rate, we analyzed the measure risk of fixed income product under the classic term structure of interest rate and apply them into the management of interest rate risk. The dissertation firstly analyzed the classic measurement of the risk, such as Duration and Convexity. Also we analyzed another measurement of risk called M-square that is based on the cash flows and how to realize immunization of portfolios.As for the dynamic study of term structure of interest rates, the dissertation introduced the stochastic term structure of interest and divided the models into equilibrium models and no-arbitrage models. Equilibrium models included Merton, Vasicek, CIR models, the latter included Ho-lee, Hull-White, BDT and HJM class models.As for the measurement of interest rate risk based on the stochastic term structure of interest rate models, the dissertation firstly analyzed the duration based on the Vasicek, and CIR models. Then the dissertation analyzed the duration and convexity based on one-factor HJM class models. Finally the dissertation presented the conclusion of the immunization based on one-factor HJM models.As for the risk management of fixed income portfolios, the dissertation introduced interest rates management policies and principles. Then the dissertation used the Principal Component Analysis to analyze the factors that influence the volatility of interest rate. Also the last chapter analyzed interest rates risk immunity strategies according to the change scope of the yield curve, and finally designed bond immunity portfolio under the HJM frames of stochastic term structure of interest rate. Finally, the dissertation analyzed the random investment period model and immunity portfolio.