Rather than limit yourself to simulated data that is full of potentially inaccurate assumptions, perhaps a better approach to falsifying the "bond fund duration glide path" hypothesis is to use real world bond prices/interest rates, as was done in the thread I linked in a somewhat limited manner and using a extreme example. That falsification prompted a revision to the approach where instead of rolling to MM directly, you roll long term to intermediate to short to MM, to more closely hug the yield curve as time passes.It may work and it may not but the claim it will negate interest rate risk is false I believe.
Nominal bond data simulating a non-rolling nominal ladder would be fine for this work because you are modeling interest rate risk rather than inflation, so you could go all the way back the the bad bond days of the 1960's and 1970's. I'm sure if any period can break it, that would be the one.
Statistics: Posted by slicendice — Tue Oct 15, 2024 9:58 pm — Replies 270 — Views 14651
