Fixed Income Attribution

Abstract: The study uses the fixed income attribtuion method suggested by Andrew Colin, to understand the decompostion of returns. Initially, a Nelson-Siegel model over the yield curve to create a mathematical estimation of the curve. The study’s aim is to rather test a piecewise Nelson-Siegel model approach and see its accuracy. After fitting the model on the yield curve, changes in the curve (i.e. shift/twsit/buuerfly) and other variables that influence the returns of a portfolio are calculated. Based on these, an analysis is performed over individual changes in return attributes to study the returns during the Covid-19 pandemic triggered recession. The results suggest and explain attributes which should be specially considered when choosing a robust portfolio.