%0 Journal Article %A Marielle de Jong %T Incorporating Linkers in a Global Government Bond
Risk Model %D 2013 %R 10.3905/jpm.2013.39.2.092 %J The Journal of Portfolio Management %P 92-99 %V 39 %N 2 %X Many governments around the world now issue inflation-protected securities, or linkers, alongside conventional nominal bonds. This extends the fixed-income investment universe. Investors may not know how to build these new securities into a bond-risk model that captures overall global-price covariance. The author studies this question through the international capital asset pricing model approach, which decomposes risk into a global systematic component and a local specific component. The challenge is to fit a linear factor model onto the triangular relationship that exists between the nominal bond yields, the inflation-linked bond yields, and yield spreads called the inflation break-even rates. The author’s model provides a consistent view of risk for internationally invested portfolios containing nominal bonds, linkers, and/or inflation swaps.TOPICS: Fixed-income portfolio management, technical analysis, global %U https://jpm.pm-research.com/content/iijpormgmt/39/2/92.full.pdf