Axioma In-Practice Series:
Fixed-Income Portfolio Optimization
Authors: Christopher Martin, Kartik Sivaramakrishnan, and Robert Stamicar
By using a risk model to analyze a portfolio, managers gain insight into risk and exposures. For example, how would an increase in spread duration in the energy sector impact the risk of a portfolio? Or what is the impact of an overweight to Financials relative to a benchmark? Fixed-income risk models allow us to quantify these questions, which in turn help managers make better decisions around on how they construct and hedge their portfolios.