Robotizing bond portfolio selection on the Russian debt market on the basis of a modified strategy of riding the yield curve

The modern global debt market features historically low average interest rates, convergence of yields on bonds with different maturities, an increase of yield curve inversion emergence frequency and a large-scale trend to automate financial decision making. The researchers’ attention in these fields is mainly focused on designing models that describe the state of the debt market as whole or its individual instruments in particular, as well as on risk management methods. At the same time, the specialized literature offers very few works concerning the topic of computer algorithms for bond portfolio selection based on traditional or advanced investment strategies. The aim of the present research is to create a modification of the existing algorithm of riding the yield curve strategy application, employing, first, average bond yield over the holding period instead of traditional bond yield to maturity; second, a developed algorithm for calculating the market spread on bonds; and, third, alternative risk evaluation indicators (compensation coefficients), which allow us to measure objectively price risk, liquidity risk, transaction costs risk and a general risk. The modification and the development of the algorithm for calculating the market spread were carried out using the direct measurement of the result technique, which entails application of the strategy to the data on bond issues received through the Moscow Exchange API. The selection of financial instruments was conducted in all sectors of the Russian debt market: public bonds, sub-federal and municipal bonds, corporate bonds. The modified algorithm enabled us to get extra yield for each selected bond issue, thereby proving the high effectiveness of the technique compared to the traditional strategy. Software implementation of the algorithm can be integrated into any robotized or semi-robotized stock exchange trading application.

VALUE AT RISK (VAR) METODE DELTA-NORMAL BERDASARKAN DURASI UNTUK UKURAN RISIKO OBLIGASI PEMERINTAH

A bond is one of invesment instrument that is basically a debt instrument. In investing, beside getting profit there is also the risk of loss. The risk of loss is unavoidable but it can be manageable. The concept of a portfolio in investing is to minimize risk. Value at Risk (VaR) is a method used to measure risk where VaR states the estimated amount of the maximum loss that will be obtained at a certain level of confidence during a certain period in normal market conditions. In this article the risk of bonds FR0053, FR0056, FR0059, FR0061 and portfolio combinations calculated with VaR value of the Delta-Normal method are calculated based on the duration of the bonds. Normality test of the bond market price return is required before calculating VaR. The results obtained if it is assumed that the bonds are purchased at a price of 100 and with a confidence level of 95%, then the portfolio that has the smallest risk is the Bond portfolio of FR0059 and FR0061 with a VaR value Rp 21,436 (Trillions).

German banks’ behavior in the low interest rate environment

Using data from a quantitative survey of German banks at three points in time (2015, 2017 and 2019), we analyze the impact of changes in the interest rate level on banks’ net interest income and the countermeasures they take. A decline in the interest rate level has a more negative impact on net interest income, the longer the decline lasts and the lower the interest rate level is. This impact softens with increasing risk of changes in the present value of banking books. We do not find that banks generally increase their risks following a drop in income. However, poorly capitalized banks subsequently increase the credit risk of their bond portfolio. After a fall in operational income, banks increase their fee and commission income and reduce their costs. In addition, banks tend to extend their mortgage lending after a drop in their interest income.

Investment and its Impact on Realized Revenues: The Case of the Investment Fund in the Hashemite Kingdom of Jordan

Aims: The study attempted to identify the volume of revenues generated from the investment process in investment funds in the Hashemite Kingdom of Jordan. Study Design: a quantitative research Place and Duration of Study: Jordan Social Security Investment Fund, between May - September 2020 Methodology: The study used panel data obtained from the published reports of the Social Security Corporation Results: The study concluded that there is a positive effect in the different portfolios on the volume of revenues generated by the investment process. Conclusion: This paper presents the conclusions through the results about the extent of the impact on the volume of revenues related to the investment process in investment funds, as it showed that the relevant impact on the tourism investment portfolio, the bond portfolio and the money market instruments portfolio has a positive impact. Effect. On the size of the volume of revenues derived from it, and in light of this, the study showed that investing in the bond portfolio generates a greater return than the tourism governorate as a result of the surrounding political turmoil in the Hashemite Kingdom of Jordan, and the instability in Syria and Iraq was most prominent, with the decrease in the external marketing of these investments. There must be diversification and research in other economic areas that contribute to increasing the volume of the fund's revenues, in governmental coordination through which a tax advantage can be achieved that contributes to reducing costs and increasing revenue generation.

A Balanced Portfolio Can Have a Higher Geometric Return than the Risky Asset

In the U.S., the geometric return on stocks has been higher than the geometric return on bonds over long periods. We study whether balanced portfolios have a larger geometric return (and expected log return) than stock portfolios when the risk premium is low. We use a theoretical model and historical data and find that this is the case. This low-risk premium is often observed in other developed countries. Further, in the past two decades, a balanced portfolio with 70% or 90% invested in the U.S. stock market (with the remainder invested in U.S. government bonds) performed better than a 100% stock or bond portfolio. The reason for this is that a pure stock portfolio loses a large fraction of its value in a downturn. We show that this result is not driven by outliers, and that it occurs even when the returns are log normally distributed. This result has broad policy implications for the construction of pension systems and target-date mutual funds.