A two-day practical guide to generating income and controlling risks in the fast-growing markets for sub-investment grade bonds
Generating income is a key objective for many investors, and one that is increasingly difficult to achieve in today's low interest rate environment. Investors are therefore increasingly turning to the high yield bond markets in the search for attractive risk-adjusted returns and income.
The purpose of this two-day course is to give you a good understanding of high yield bonds and their risk-return characteristics and to provide you with a guide to investing successfully in this asset class.
We start with an introduction to high yield bonds and high yield bonds markets, giving an overview of recent market developments. We also give an overview of the different types of high yield bonds and important benchmarks.
Thereafter, we take a closer look at the historical performance and the risk-return characteristics of high yield bonds. We introduce and explain various measures of yield and risk and we show how the relative attractiveness of high yield investments can be can be assessed using break-even analysis of promised yield vs. Expected default losses under various interest rate scenarios.
We then turn to credit analysis. We give you a thorough review of fundamental and quantitative methods for assessing the quality and credit risk of high yield bonds. We illustrate with practical, real-life examples. We also explain the rating agencies approaches to assessing the credit quality of corporate bond issues and we demonstrate how the credit risk can be quantified using "internal" models.
Further, we present and explain different ways of investing in high yield bonds. We focus in particular on the opportunities currently offered in higher-quality, short duration high-yield bonds. We explain and demonstrate why these bonds have the potential to generate attractive risk-adjusted returns and income, with less interest rate sensitivity versus investment-grade alternatives. We also explain how the observed tendency for bond ratings to "mean revert" can be exploited through stable allocations strategies.
We demonstrate how HY bonds can be fitted into a broad asset allocation strategy to improve portfolio efficiency, and we explain and illustrate how the risks of the portfolio can be controlled using credit derivatives and other instruments.
We conclude with an outlook for the high yield markets. We present a number of macroeconomic scenarios and discuss their possible consequences for high yield investments.