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Investors use two management strategies to manage their fixed income portfolios. They adopt either active management strategy or passive management strategy.
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Active management can be defined as forecasts of returns for assets that are available.
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A portfolio manager can minimize the values of the bond portfolio while implementing liability funding methods.
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The bond market can be classified into various segments based on the nature of characteristics such as type of issuer, credit risk, coupon level etc.
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Yield curve strategies are classified into bullet strategies, barbell strategies and ladder strategies.
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Passive management strategy believes in Efficient Market Hypothesis.
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Bond indexation serves the purpose of replicating the performance of a predetermined benchmark as closely as possible.
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Cash flow matcshing strategy is used to build portfolio wherein the cash flows of the bond portfolio exactly match a stream of liabilities.
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Active bond management depends on an economic scenario in order to forecast the movements of yield curve.