Bond Pricing and Immunization Strategy - Asset Allocation in Bond Investment

DOI

10.2991/assehr.k.211209.075How to use a DOI?

Keywords

Bond Price; Duration; Immunization strategy; Investment portfolio

Abstract

Asset allocation is a widely used financial term that fits most people. However, even in the most basic concept of asset allocation, there is still existing risk or uncertainty. This paper aims to discuss the impact of different influencing factors on bond pricing in the bond market and then further discuss the risk aversion strategy that can be analyzed through the duration, also known as the immunization strategy. We also conduct sensitivity analysis of four different situations, changing different yield rates and coupons and changing increasing yield rates and coupons at a certain rate. This paper found that different yield rates, different coupons, and increasing yield rates have a linear relationship with the bond price. In contrast, the increasing coupon with a certain ratio has a nonlinear relationship. Through immunization strategy, it can develop an asset portfolio composed by a certain ratio. Also, using the immunization strategy can reduce the risks that investors need to take and maximize their interests to a certain extent. The combination of a certain percentage of zero-coupon government bonds and corporate bonds effectively shields investors from risk. This paper constructs the issue of bond pricing, which is of practical significance for investors to evaluate their risk-bearing ability and purchasing ability and to use the immunization strategy of hedging risk.

Copyright

© 2021 The Authors. Published by Atlantis Press International B.V.

Open Access

This is an open access article under the CC BY-NC license.

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TY  - CONF
AU  - Yuyao Wang
AU  - Bixia Han
PY  - 2021
DA  - 2021/12/15
TI  - Bond Pricing and Immunization Strategy - Asset Allocation in Bond Investment
BT  - Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021)
PB  - Atlantis Press
SP  - 454
EP  - 461
SN  - 2352-5428
UR  - https://doi.org/10.2991/assehr.k.211209.075
DO  - 10.2991/assehr.k.211209.075
ID  - Wang2021
ER  -