Contents and Contributors

Part I Background 1. Introduction 3 Frank J. Fabozzi, Massachusetts Institute of Technology 2. Global Investing: The Importance of Integrating Asset Selection with Investment Horizon 7 Chris P. Dialynas, Pacific Investment Management Company

Part II Indexing 3. Indexation and Optimal Strategies in Portfolio Management 17 Mark L. Dunetz, Kidder, Peabody & Co., Inc. James M. Mahoney, Kidder, Peabody & Co., Inc. 4. Global Bond Indexation: Concepts, Approaches, and Challenges 29 Agustin R. Sevilla, Chase Investors Management Corporation Frederick Novomestky, Chase Investors Management Corporation 5. Mortgage-Backed Securities Indexation 53 Llewellyn Miller, Drexel Burnham Lambert Edward P. Krawitt Michael P. Wands, Drexel Burnham Lambert

Part III Immunization and Dedicated Strategies 6. Optimal Funding of Guaranteed Investment Contracts 79 Llewellyn Miller, Drexel Burnham Lambert Nancy Roth, Drexel Burnham Lambert vi Contents and Contributors

7. Finding the Immunizing Investment for Insurance Liabilities 97 Peter D. Norris, Morgan Stanley Sheldon Epstein, Merrill Lynch Capital Markets 8. Funding SPDA Liabilities: An Application of Realized Return Optimization 143 Llewellyn Miller, Drexel Burnham Lambert Prakash A. Shimpi, Drexel Burnham Lambert Uday Rajan, Drexel Burnham Lambert 9. Duration, Immunization, and Volatility for Taxable 167 Debt Securities Grant McQueen, University of Washington Roger Clarke, TSA Capital Management Ivan Call, Brigham Young University 10. Beyond Cash Matching 189 T. Dessa Fabozzi, Merrill Lynch Capital Markets Tom Tong, Merrill Lynch Capital Markets Yu Zhu, Merrill Lynch Capital Markets

Part IV Portfolio Insurance 11. Portfolio Insurance in the Fixed Income Market 215 Erol Hakanoglu, Goldman, Sachs & Co. Robert Kopprash, Hyperion Capital Management and Ranieri & Wilson Co. Emmanuel Roman, Goldman, Sachs & Co. 12. Portfolio Protection for Fixed Income Portfolios, Balanced Portfolios, Surplus Protection 245 Ethan S. Etzioni, Oppenheimer Capital

Part V Bond Analysis Tools 13. Spread Duration: A New Tool for Bond Portfolio Management 263 Martin L. Leibowitz, Inc William S. Krasker, Salomon Brothers Inc Ardavan Nozari, Salomon Brothers Inc 14. The Analysis of Credit Barbells: An Application of the Spread- Duration Technique 275 Martin L. Leibowitz, Salomon Brothers Inc William S. Krasker. Salomon Brothers Inc Ardavan Nozari, Salomon Brothers Inc Contents and Contributors vii

15. Structuring Portfolios in an Uncertain Volatility Environment: Enhancement Opportunities with Callable Securities 287 Steve Mandel, Salomon Brothers Inc Y. Y. Ma. Salomon Brothers Inc Ardavan Nozari, Salomon Brothers Inc Gary Shkedy, Salomon Brothers Inc 16. Duration-Equivalent Butterfly Swaps 299 N. R. Vijayaraghavan, Drexel Burnham Lambert Monte H. Shapiro, Drexel Burnham Lambert

Part VI Strategies with Interest Rate Risk Control Instruments 17. Hedging with Futures and Options 321 Laurie S. Goodman, Goldman, Sachs & Co. 18. Hedging with Eurodollar Futures 345 Daniel Nadler, Lehman Hutton 19. Applying Futures and Options to Restructure Bond Portfolio Returns 375 Yu Zhu, Merrill Lynch Capital Markets 20. Synthetic Asset Strategies 397 Robert P. Lecky, Jr., The First Corporation 21. Capping the Interest Rate Risk in Insurance Products 445 David F. Babbei, & Co. and University of Pennsylvania Peter Bouyoucos, Goldman, Sachs & Co. Robert Strieker, Goldman, Sachs & Co.

Part VII International 22. Structuring and Managing an International Bond Portfolio 477 Andrew Gordon, The First Boston Corporation 23. Measuring the Yield of Currency Hedged Foreign Bonds: New Tools for International Fixed Income Investors 495 Lee R. Thomas HI, Investcorp 24. Tactical Trading Opportunities Using Currency Hedged 517 Foreign Bonds Lee R. Thomas III, Investcorp Edwin Robertson, Goldman, Sachs & Co. viii Contents and Contributors

25. The Role of Currency Hedged Bonds in International Fixed Income Diversification 535 Vilas Gadkari, Salomon Brothers Inc Salvador Demafilez, Salomon Brothers Inc

Part VIII Mutual Fund and GIC Portfolio Management 26. Mutual Funds and the Mortgage Market: The Impact of New SEC Rules Governing Performance Advertising on Mutual Fund Investment Strategies 553 Scott M. Pinkus, Goldman, Sachs & Co. 27. GIC Portfolio Management 575 David M. Perry, Certus Financial Corporation

Part IX Normal Portfolios 28. Fixed Income Normal Portfolios and Their Application to 595 Fund Management Edgar A. Robie, Jr., Western Asset Management Company Peter C. Lambert, Dodge & Cox Index 607