Another important point here is convexity.... Convexity is higher for barbell portfolio and it always favours investors.... Becoz of yield increased,highher convecity portfolio falls less and if yield decreases higher convexity portfolio increases more..
i'd say more bcs of convexity Here's my answer: Barbell when investing in a barbell the investor is long in the ultra short (2Y) as well as in the ultra long end (30y). Because the barbell is the portfolio with the most dispersion between the 2 tenors, higher dispersion leads to higher convexity, which is positive for the investor because it makes him / her gain more when yield go down (30 years) and makes him / her lose less when yields go up (2 year tenor)
Duration neutral means bullet duration= barbell duration Basically money duration should be equal for both bullet and barbell In barbell portfolio Weightage of 2 yr and 30 yr bond would be different .... No short or long leg
@@rohanmetai6789 What you're describing is a duration match. Not a duration neutral trade. A duration neutral trade has, I believe, a net duration of 0 (similar to equity market neutral trade has beta of zero).
How does an answer like this give full points? The question asks about the "best" which implies a comparison. How is the barbell portfolio justified as the "best" when you don't even compare it with the other options in the justification part of the answer?
Choice: Barbell
Justification: Boom
4/4 points lol
anyways, i think the question you gave was super easy. i wish the exam will be this easy
Another important point here is convexity....
Convexity is higher for barbell portfolio and it always favours investors....
Becoz of yield increased,highher convecity portfolio falls less and if yield decreases higher convexity portfolio increases more..
i'd say more bcs of convexity
Here's my answer:
Barbell
when investing in a barbell the investor is long in the ultra short (2Y) as well as in the ultra long end (30y). Because the barbell is the portfolio with the most dispersion between the 2 tenors, higher dispersion leads to higher convexity, which is positive for the investor because it makes him / her gain more when yield go down (30 years) and makes him / her lose less when yields go up (2 year tenor)
If it's a duration neutral trade, then wouldn't one leg of the barbell be short and the other leg long?
Duration neutral means bullet duration= barbell duration
Basically money duration should be equal for both bullet and barbell
In barbell portfolio
Weightage of 2 yr and 30 yr bond would be different ....
No short or long leg
@@rohanmetai6789 What you're describing is a duration match. Not a duration neutral trade. A duration neutral trade has, I believe, a net duration of 0 (similar to equity market neutral trade has beta of zero).
How does an answer like this give full points? The question asks about the "best" which implies a comparison. How is the barbell portfolio justified as the "best" when you don't even compare it with the other options in the justification part of the answer?