Adjusting for Risk Effects in Fixed Income Portfolios
提出一种算法，通过模拟因子组合来消除固定收益投资组合中的风险差异，从而区分选股与择时能力，并应用于信用债组合以调整久期乘利差风险，发现调整前后业绩差异显著。
Default and term structure risk are key drivers of fixed income performance. Ignoring this information when comparing investment strategies can be misleading. This study proposes an algorithm derived from mimicking factor portfolios to neutralize risk differences, thereby distinguishing selection from market timing. For a well-diversified portfolio, this method allows for simultaneous management of multiple risk dimensions, ensuring the final portfolio remains investable. The algorithm can be modified in such a way as to guarantee positive weights, thus offering greater flexibility compared with conventional methods. We apply it to credit sector portfolios to neutralize discrepancies in duration times spread (DTS) and find notable differences between risk-adjusted and unadjusted performance.