16657 Lecture Notes - Lecture 8: Spot Contract, Foreign Exchange Market, Derivatives Market
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8. 9) you are the manager of a bond fund; market opinion is split about next week"s rba meeting, approximately 50% consider that the rba will reduce rates while approximately 50% consider that the rba will leave rates unchanged. You consider that the rba will reduce rates, outline your investment strategy in the light of this opinion. Increase exposure to bond markets before the interest rate change, therefore, when the rates decrease the bonds will be worth more money. The top down approach starts by analysing the future prospects and risks of the local economy (and quite likely the international economy). This is followed by an assessment of the sector in which that company is operating. For example, when analysing a mining company this would include an analysis of the global demand of the commodities (iron ore, coal) that the company mines, then an analysis of the local economy.
