Day One: Foundations of Fixed Income Attribution
1. Introduction and Laying the Groundwork
Overview of Attribution: What it is and its value in investment analysis
Basics of Performance Measurement
Foreign Exchange, Hedging, and Benchmarks
2. Stock Selection and Asset Allocation
3. Smoothing in Attribution
Importance of Smoothing in Attribution
Smoothing Models: Carino, Menchero, Frongello, and geometric models
Exercise: Practical application in performance measurement, equity attribution, forwards, and smoothing
4. Review of Fixed Income Fundamentals
Overview of Fixed Income Risks: Bonds as bundles of risks
Yield Curves: Par, zero, and real yield curves
Pricing, Risk, and the Fundamental Attribution Equation
Exercise: Breaking down and analyzing yield curves
Day Two: Return Decomposition and Attribution by Security Type
1. Decomposing Fixed Income Return
Types of Return in Fixed Income:
Carry and roll-down
Risk-free curve returns: duration, shift/twist/butterfly, key rate durations
Sector and Credit Returns: country spread, spread change allocation, sector-specific returns
Other Returns: paydown for amortizing securities, convexity, repricing, and trading returns
2. Attribution Models Overview
Widely Used Models: Campisi, Tim Lord, and Van Breukelen
Sector-Specific Models: Top-down, EMD, high-yield
Exercise: Applying various attribution models to fixed income
3. Attribution by Security Type
Attribution for Bonds and Perpetuals
Money Markets: Cash, bills, discount securities, CDs, FRNs, and forwards
Inflation-Linked Securities and Breakeven Return
Futures and Identifying the Cheapest-to-Deliver
Exercise: Conducting attribution on a sample portfolio
Day Three: Advanced Attribution Techniques and Risk Integration
1. Attribution by Security Type (continued)
Sinkers, amortizing bonds, MBS, and ABS
Swaps, Credit Derivatives, Options, and Callable/Puttable Bonds
Exercise: Attribution for a diverse portfolio with different security types
2. Attribution and Risk Integration
Applying Attribution to Risk Metrics: Calculating VaR and Expected Tail Loss (ETL)
Reporting, Residuals, and Short-cuts for Efficient Analysis
Additional Models: Style attribution, risk attribution, stochastic attribution
3. Advanced Topics and Q&A
Real-World Examples: Duration attribution, curve steepening, sector/credit spread analyses, and positioning strategies
Q&A on Special Topics:
Curvature vs. convexity
Measuring parallel shifts
Understanding time return in zero-coupon bonds
Selecting risk measures: Modified duration, Fisher-Weil duration, or DV01
Handling hedged benchmark issues
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