Strategy #0000000030 · Fixed income and asset allocation
Bond bullet, barbell and ladder allocation
Compare carry, duration-based price moves and reinvestment across maturity structures.
The three bond allocations differ in maturity cash flows and reinvestment timing. A bullet concentrates principal at one point, a barbell at short and long ends, and a ladder at regular intervals. Comparisons should control initial duration, credit quality, cash flows and funding.
Bullet, barbell and ladder are maturity allocations; none dominates in every curve regime.
Three ways in
Understand the story. Then inspect the risk.
Start with a familiar situation, check the payoff, then test how the numbers change.
The idea · in two minutes
Rose compares three maturity schedules against one liability
Jack needs a known payment in two years and considers a two-year bullet, a short/long barbell or an annual ladder. Rose first aligns initial capital, credit quality and interest-rate sensitivity.
Under a parallel curve move and matched duration, first-order price sensitivity can be similar. A barbell often has higher convexity, while a ladder spreads maturity and reinvestment dates. The rate available when short bonds mature is unknown, so a ladder does not lock in a return.
She separates carry, duration-based price approximation and non-parallel curve shocks, then includes the liability date. Yield to maturity is not a guaranteed realised return; default, spreads, reinvestment, taxes and inflation matter.
- Bullet · assumed curve shockBullet = 100% middle maturity; barbell = short/long ends; ladder = equal weights across three tenors.
- Barbell · assumed curve shockOne-period approximation: yield carry − modified duration × yield move − costs.
- Ladder · assumed curve shockSeparate tenor shocks let the scenario compare non-parallel curve moves.
Illustrative research examples only. They are not live signals or a recommendation.
The mechanics · payoff and exposure
R_{p,\Delta t}\approx\sum_{i=1}^{n}w_i\left(y_i\Delta t-D_i\Delta y_i\right)-TC,\quad \sum_iw_i=1
w_i are market-value weights, y_i annual yields, Δt the holding period in years, D_i modified duration and Δy_i the decimal yield move. TC covers trading and reinvestment costs. Price change uses first-order duration and omits convexity and credit-spread moves.
Greeks: the directional intuition
- Duration
- Measures sensitivity to implied volatility.
- Convexity
- Measures sensitivity to implied volatility.
- Reinvestment
- Measures sensitivity to implied volatility.
- Credit and liquidity
- Measures sensitivity to implied volatility.
R_{p,\Delta t}\approx\sum_{i=1}^{n}w_i\left(y_i\Delta t-D_i\Delta y_i\right)-TC,\quad \sum_iw_i=1
Practical context · published observations
Bond bullet, barbell and ladder allocation: read the record with its caveats.
The chart uses the published figures or explicitly labelled study inputs below. A historical index or model replay is not the same as an investor’s realised account return.
互動工具是單期、duration 一階近似的假設算例，不是債券指數回測或保本承諾。真實比較需要點時曲線、債券現金流、信用風險、再投資和買賣價格。 Source ↗ · Methodology ↗
Change assumptions and inspect the scenario
Inputs illustrate the strategy mechanics; they are not live quotes, forecasts or investment advice.
Variants · same family, different risk levers
Related methods share a mechanism, not every assumption.
Each row identifies what changes in its signal, construction or risk.
| Related strategy | Relationship | What changes | New cost or risk |
|---|---|---|---|
| Bullet | Single maturity | Concentrates principal repayment near a target date. | A maturity mismatch concentrates reinvestment risk. |
| Barbell | Short and long ends | Matches initial duration with short and long holdings, changing convexity. | Combines long-end volatility and short-end reinvestment risk. |
| Ladder | Staggered maturities | Allocates across regular tenors and rolls maturities forward. | Curve shape and roll rules create path differences. |
The tool is a one-period first-order duration scenario, not a bond-index backtest or principal guarantee. A real comparison needs point-in-time curves, cash flows, credit, reinvestment and executable prices.
Read beyond the summary
References
Primary sources and research used to describe the strategy and its limits.