The Maturity of Fixed-Income Assets and Portfolio Risk

Abstract

This article focuses on the decision of the appropriate maturity of nominal return Treasury bonds. The question it seeks to answer is: Are investors compensated for taking on additional risk by extending the maturity of fixed-income assets? As we will demonstrate, the answer (at least in terms of investments in Treasury bonds) is that it depends on the investor’s overall asset allocation and how far out the maturities are extended.

TOPICS: Risk management, equity portfolio management, fixed-income portfolio management