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BOND MATH: The Theory Behind the Formulas by Donald J. Smith

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Conclusion

It is surely an unfair comparison, but sometimes bonds to me are like middle-school-age children. On their own, as individuals, they are fine and usually well behaved. The same can be said for bonds. I understand them and their risk-return profile. I can measure their comparative static properties. The problem is when they run together in portfolios, like children in a shopping mall. It's hard to predict pack behavior using weighted averages of their individual statistics.

You need a really good strategy to build and manage a bond portfolio. That comes next.

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