Yield Curve Decomposition and Fixed-income Attribution

Description

Fixed-income attribution has been one of the key challenges for performance measurement professionals for some time; though there has been extensive research into differing methodologies, there is still no agreed industry standard.  Fixed-income attribution cannot be implemented simply by adapting an equity model because the investment process for fixed-income portfolios differs significantly from that for equity portfolios.  To understand the performance, fixed-income portfolio managers need to understand how much performance is due to holding period; the effect of different changes in yield curve: parallel, twist, butterfly, and other shape changes; as well as quality and currency impacts.