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Bond Trading, Portfolio Rebalancing, and Electronic Exchanges

In: Quantitative Global Bond Portfolio Management

Author

Listed:
  • Gueorgui S. Konstantinov
  • Frank J. Fabozzi
  • Joseph S. Simonian

Abstract

The decision pertaining to when and how to trade in the bond market is essential for bond portfolios. After executing the initial trades in a portfolio allocation, a portfolio manager may need to periodically modify their portfolio holdings and adjust their exposure to accommodate changes in the market environment. This activity is referred to as portfolio rebalancing. Trading and rebalancing are natural processes associated with portfolio management as risk and returns change over time and new allocations are desired. Over time, developments in bond markets and technological progress have improved the velocity and efficiency of trading. However, the basic mechanics of how managers trade remain essentially the same. This chapter explains how rebalancing and trading work depending on portfolio management style — discretionary or systematic.

Suggested Citation

  • Gueorgui S. Konstantinov & Frank J. Fabozzi & Joseph S. Simonian, 2023. "Bond Trading, Portfolio Rebalancing, and Electronic Exchanges," World Scientific Book Chapters, in: Quantitative Global Bond Portfolio Management, chapter 8, pages 229-257, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811272578_0008
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    More about this item

    Keywords

    Fixed-Income; Currency Management; Portfolio Management; Risk Management; Factors; Portfolio Optimization; Hedging; Portfolio Evaluation; Performance Attribution;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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