Managing Structured Bonds: An Analysis using RAROC and EVA

Journal of Risk Management in Financial Institutions, Vol. 2, No. 4, pp. 409-426, 2009

Posted: 9 Jan 2011

See all articles by Rosa Cocozza

Rosa Cocozza

University of Naples Federico II - Faculty of Economics

Albina Orlando

Italian National Research Council (CNR)

Date Written: January 30, 2009

Abstract

The paper investigates a decision criterion for structured bonds portfolio choices. The main issue is the application of risk-adjusted indicators as tools to select either the asset portfolio given a structured bond, or the bond structure given an existing coverage asset portfolio. Such an indicator is suitable for the appraisal of both portfolio management and the potential profits of the structured issue. The selection tool is put into an asset and liability management decision-making context, where the relationship between the expected profit and the capital-at-risk are compared in order to evaluate the issue of the bond and the expected rate of return of the whole portfolio. The case is referred to an equity-linked bond and treated by means of Monte Carlo simulations to identify the best portfolio according to the issuer targets and constraints.

Keywords: portfolio management, equity linked notes, economic value added, risk analysis

JEL Classification: G11, G20, G32, C63

Suggested Citation

Cocozza, Rosa and Orlando, Albina, Managing Structured Bonds: An Analysis using RAROC and EVA (January 30, 2009). Journal of Risk Management in Financial Institutions, Vol. 2, No. 4, pp. 409-426, 2009, Available at SSRN: https://ssrn.com/abstract=1736962

Rosa Cocozza (Contact Author)

University of Naples Federico II - Faculty of Economics ( email )

Via Cintia Monte S. Angelo
Napoli, 80126
Italy
+39/81675083 (Phone)

HOME PAGE: http://www.docenti.unina.it/rosa.cocozza

Albina Orlando

Italian National Research Council (CNR) ( email )

Via San Martino della battaglia, 44
Roma, 00185
Italy

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
668
PlumX Metrics