NO.PZ202209060200004506
问题如下:
Ashley West is the Managing Director of Credit Strategies at Mt. Pleasant Advisers (MPA). She oversees a group of strategists, analysts, and traders who contribute to managing more than $50 billion in fixed-income securities. She has gathered her group for their weekly investment strategy meeting, where they are currently focused on higher expected volatility in the markets. West makes the following comments:
West begins a discussion with her trader, Daniel Island, regarding return compensation for investing in corporate bonds. Island tells West, “When I am evaluating the price of a corporate bond, the screen on my Bloomberg terminal shows several spread measures. Some measures are better than others. Dealers often will quote me a spread to Treasuries whose maturity does not match the bond’s maturity.”
Charles Stone joins the conversation. He is MPA’s credit strategist and coordinates the recommendations of the analysts to portfolio managers. The analysts have provided him with data for three corporate bonds in the media sector that include the credit rating, spread duration, z-spread, and expected loss severity. He asks the analysts to provide data for three additional measures that he feels are required for the portfolio managers to select the most attractive bond using relative value analysis. The measures include expected probability of default, rating agency credit outlook, and historical sector default rates.
West likes to balance the bottom-up approach for portfolio construction with a top-down approach. She provides portfolio managers with a macro factors report containing two sections that they use as part of their investment process. Section 1 shows macro factors that she considers relevant for credit investing and includes corporate profitability, economic growth, currency movements, changes in expected market volatility, key rate durations, and default rates. Section 2 contains risk measurements that are used for credit portfolio management and includes average credit rating, average spread duration, duration times spread, average OAS, duration, and effective convexity.
West is concerned about liquidity risk in the credit markets. She believes that since the Great Recession, liquidity has declined, and she asks Stone for his opinion on the topic. Stone replies, “First, trading volume has declined across credit markets, even for higher-quality sectors. As a result, liquidity management has become less relevant to portfolio managers as a means of adding alpha to portfolios. Second, spread changes are more pronounced during times of outflows in high-yield markets relative to investment-grade markets, particularly during times of stress. Therefore, macro forecasting of the economic and credit cycle would aid in positioning the portfolio to compensate for liquidity risk. Third, bid–ask spreads can vary over time and are a good indicator of liquidity. Wider bid–ask spreads in a market downturn create opportunities for portfolio managers to add value to portfolios.”
Stone fields a call from Edisto Palma, an MPA portfolio manager in the Madrid office. Palma is frustrated with the negative interest rate environment present in the European Union (EU) debt markets resulting from the European Central Bank’s quantitative easing programs. He tells Stone he is considering buying securities outside of the EU market to pick up additional yield. Stone informs Palma that he is sympathetic with the situation but that there are implications to buying securities outside his EU benchmark, whether they are from developed or emerging markets. Stone outlines three suggestions for Palma. First, he should evaluate whether the spread advantage is negated by the cost of a currency hedge. Second, he should avoid local currency investments in countries where the exchange rate is pegged. Third, he should ensure that the timing of the credit cycles across markets coincides.
Question
Which of the suggestions Stone outlines for Palma in selecting the proposed investments is most likely correct? The one regarding:
选项:
A.local currency investment is most likely correct. B.spread advantage is most likely correct. C.the credit cycle is most likely correct.解释:
SolutionB is correct. Investments in securities denominated in a foreign currency can often produce higher yields than domestic investments produce, particularly in emerging market countries. However, if the portfolio manager chooses to hedge the foreign exchange (FX) exposure, the cost of hedging can offset a significant amount of the yield advantage, thus reducing the relative value advantage. This may not be the case for currencies that are pegged because the portfolio manager may choose not to hedge the FX because the foreign currency will most likely be more stable, assuming there is no devaluation.
A is incorrect because investments in countries where the currency is pegged may not require FX hedging, given more stability in the exchange rate.
C is incorrect because credit cycles may vary across regions and this can be used to the advantage of the portfolio manager to diversify.
按道理固定汇率制会增加Financial Distress,会让货币政策失效。我们确实不应该投资这样的国家呀?