Fixed Interest Securities and Credit Risk Modelling assignment Bond portfolio management is a critical skill for fixed income investors. A wellconstructed bond portfolio should take into account investment objectives, risk tolerance, market conditions, and other factors that may affect its performance.

The objective of this assignment is to construct a bond portfolio that meets specific investment objectives and constraints and then evaluate its performance. In particular, you need to demonstrate you can $(1)$ formulate investment objective$($s$),$

$(2)$ construct a bond portfolio appropriate for the investment objective$($s$),(3)$ evaluate

risks and performance of a bond portfolio, $(4)$ use interest rate futures to modify

interest rate exposure of the portfolio and understand the risks of such a strategy, and $(5)$ draw conclusions based on your results. Required

You need to

$($i$)$ Formulate and explain your investment philosophy $($e$.$g$.,$ index replication, beating the index $...),$ your choice of bonds and their weights in your portfolio.

$($ii$)$ Evaluate the performance of your portfolio on the evaluation date $($any date of your choice after $13$th March $2024)$ and compare it to that of the Barclays$-$Bloomberg UK Aggregate Index $($or another broad$-$based index that you believe is more suitable$).$

$($iii$)$ Discuss the performance of your portfolio with reference to your investment objectives.

$($iv$)$ Hedge the interest rate exposure of your portfolio on the formation date $(2$nd January, $2024)$ using Three Month SONIA Index Future or the Long Gilt Future traded on the Intercontinental Exchange.

$($v$)$ Critically evaluate the performance of your hedge.