How Can We Hedge Against Systematic Risk in High Yield Bond Portfolios?
Abstract
Abstract Equity-linked assets, such as futures on the S&P 500 have been considered as hedging instruments for systematic risk in high-yield bond (HYB) portfolios. We construct macro-dependent hedge ratios to rebalance monthly HYB portfolios. For the period spanning March 2000 to October 2020, we estimated hedging ratios that vary with macroeconomic and market volatility factors. These factors drive changes in the covariances between the asset classes in our menu and enable us to hedge effectively against HYB systematic risk.
Fields of Study & Subjects
Financial Risk and Volatility Modeling
Financial Markets and Investment Strategies
Credit Risk and Financial Regulations
Publication details
- Journal / source
- Advances in Pacific Basin business, economics and finance
- Publisher
- Emerald Publishing Limited
- Pages
- 35–62
- Publication date
- 4 August 2026
- Language
- EN
- Document type
- Book chapter