PT - JOURNAL ARTICLE AU - Geoff Warren TI - Portfolio Risk Consequences of Fixed-Income Exposures AID - 10.3905/JPM.2009.35.4.052 DP - 2009 Jul 31 TA - The Journal of Portfolio Management PG - 52--59 VI - 35 IP - 4 4099 - https://pm-research.com/content/35/4/52.short 4100 - https://pm-research.com/content/35/4/52.full AB - Interest rate and credit exposures can have quite different consequences for risk when viewed from a total portfolio perspective and from the perspective of a fixed-income portfolio in isolation. Within a fixed-income portfolio, interest rate exposure enhances volatility, whereas credit exposure can play a diversifying role. Conversely, at the total portfolio level, credit exposure tends to augment risk, while interest rate exposure may impact only modestly, or possibly even reduce, overall portfolio volatility. This dichotomy can give rise to agency problems when management of fixed-income portfolios is delegated. The author suggests various approaches for designing fixed-income mandates to better align them with investor objectives.TOPICS: Fixed-income portfolio management, VAR and use of alternative risk measures of trading risk, volatility measures