MBA Knowledge

Portfolio management technique in which bonds are bought and sold simultaneously (to profit from changes in their market value) by swapping one type of bond with another. Three main types of swap are:

1. Maturity swap: exchanging long-term bonds with short-term ones, and vice versa.
   
2. Quality swap: exchanging highly-rated bonds with low-rated ones, and vice versa.
   
3. Yield swap: exchanging deep-discount bonds with high-interest bonds, and vice versa