Question

How do bond investors manage various factors related to bond price volatility?

How do bond investors manage various factors related to bond price volatility?

Homework Answers

Answer #1

Bond investors will manage various factors related to bond price volatility through proactive management and they should be properly diversified through-

A. Bond immunization technique which can help them to manage various factors which will cause the volatility in the prices of the bonds

B. They can also hedge themselves through active portfolio management by having a portion of their exposure in equity

C. They can also have a substantial mix of investment grade bonds with the little mix of junk bond so that their probability for making higher rate of return can we also fulfilled

D. They can also have a significant exposure in treasury bills and other treasury securities in order to maximize the security e of the portfolio

E. They can get exposure into floating rate bonds to eliminate the effect of fluctuation in the interest rates

F. They can also enter into swapping to exchange their fluctuation in prices

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