Hedging Strategy With Bonds: A Solution To Reduce Portfolio Volatility
Abstrak
High financial market volatility poses significant risks to investment portfolios. Therefore, this research aims to explore hedging strategies using bonds as a solution to reduce portfolio volatility. A qualitative approach was used with case study methods and in-depth interviews with investment managers, market analysts, and academics who have expertise in portfolio and bond management. Primary data were collected through semi-structured interviews, while secondary data were obtained from academic literature, bond market reports, and official documents. Research results show that bonds, particularly government bonds, are effective instruments for portfolio stabilization due to their characteristics of low risk and fixed income. The effectiveness of this hedging strategy is influenced by the duration of the bonds, market conditions, and the proportion of asset diversification in the portfolio. However, challenges such as liquidity constraints on corporate bonds and external impacts like global monetary policy need to be managed carefully. This research emphasizes the importance of bonds in portfolio risk management strategies, particularly in the context of the Indonesian market. These findings contribute both practically for investors and portfolio managers and academically to the development of risk management studies. The recommendation for further research is to integrate bonds with derivative instruments to enhance hedging efficiency.
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