Understanding the economic cycle significantly influences the evolution of spread curves. Managers and candidates must grasp how spread curves behave throughout the credit cycle regarding their levels and expected changes. This knowledge is crucial for making informed decisions about positioning…

A Credit Default Swap (“CDS”) is a tool that allows investors to isolate and manage credit risk apart from other fixed-income risk exposures. As a reminder, credit risk involves the chance of a borrower not repaying funds due. CDS Mechanics…

Liquidity in Fixed Income Markets Unlike equity markets, fixed-income markets are generally less liquid despite being more prominent. This reduced liquidity can be attributed to several factors discussed in this section. Among these factors, the absence of uniformity in bond…

Overview Securities analysts can use two main approaches for selecting investments: top-down and bottom-up. The top-down method starts with macro factors, like GDP, to influence investment choices based on expectations. While it considers major forces, it’s a disadvantage because many…

Overview Securities analysts can use two main approaches for selecting investments: top-down and bottom-up. The top-down method starts with macro factors, like GDP, to influence investment choices based on expectations. While it considers major forces, it’s a disadvantage because many…

As discussed in the previous LOS, a spread quantifies the yield distinction between comparable yet distinct bonds. Spreads pinpoint particular risk factors, each carrying its distinct narrative. We commence with the benchmark spread. Benchmark /Government “G-spread” The basic idea behind…

Reading 22: Fixed Income Active Management: Credit Strategies Los 22 a: Describe risk considerations for spread-based fixed-income portfolios Los 22 b: Discuss the advantages and disadvantages of credit spread measures for spread-based fixed-income portfolios and explain why option-adjusted spread is…

Fixed Income Vocabulary Review Before delving into the content of Reading 22, let's quickly revisit some key terms. This section of the curriculum focuses on enhancing portfolio management using credit risk, which is inherent in the credit markets. The credit…

 The choice between managing a portfolio of equities passively or actively involves various minor decisions. The result is not strictly a binary yes-or-no answer. Instead, it can be viewed as a decision that falls along a spectrum. This decision-making…

Reading 23: Overview of Equity Portfolio Management Los 23 a: Describe the roles of equities in the overall portfolio Los 23 b: Describe how an equity manager’s investment universe can be segmented Los 23 c: Describe the types of income…