Pure Yield Pickup Swap – Definition

Cite this article as:"Pure Yield Pickup Swap – Definition," in The Business Professor, updated December 2, 2018, last accessed July 11, 2020, https://thebusinessprofessor.com/lesson/pure-yield-pickup-swap-defined/.


Pure Yield Pickup Swap Definition

A pure yield pickup swap is bond purchase and sale transaction, where the investor swaps her short-term, low-yield bond is exchanged for a longer-term, higher-yield bond.

A Little More on What is Pure Yield Pickup Swaps

This transaction is used by investors who are looking for more yield and are willing to take on more risk. Basically, it is a way for an investor to exchange her lower-risk assets (short-term bonds) for higher-risk assets (long-term bonds), as the higher-risk assets have a higher return.
The downside is that the longer-term bonds are generally a lower quality rating. Long-term bonds have greater risk because there is more time for interest rates to change. If interest rates rise, then the value of previously-issued bonds goes down (as they are at the older, lower interest rate).

References for Pure Yield Pickup Swap

Academic Research on Pure yield Pickup swap

·       Fixed income portfolio management, Bond, Z. C. (1985). change9(990.64), 934-96. This research paper explains in details the management of the fixed income portfolio and its relationship with the yield curve as well as the valuable insights as regards duration targeting.

·       Bond Swaps And The Application Of Duration, Boardman, C. M., & Celec, S. E. (1980). Business Economics, 49-54. According to this research analyses, the bond swap and its application as regards duration were practically examined and different models were used as an example to back up these claims.

·       Inside the Yield Book, Mlynarczyk Jr, F. A. (1973). According to scholars, this research paper explains the yield book itself. The ways and manner in which the yield curve and yield slope operate and their significance in government policies.

·      Inside the Yield Book: The Classic That Created the Science of Bond Analysis (a review), Fridson, M. S. (2013). This paper explains the valuable insight into duration as regards the laid down explanation examined in the third edition of the Inside the Yield Book. This research work builds its hypothesis on the structure and principle of this book. According to this book, mathematical findings with accessibility and clarity that explains the writing of Leibowitz and Homer for more than 40 years before the advent of formulas were also used to evaluate the fixed-money analyses of this research paper.

·       Successful Investing Is a Process: Structuring Efficient Portfolios for Outperformance, Rzepczynski, M. S. (2014).  This paper adopted the use of 50 years of theory and methodological evidence according to the author’s present protocols as regards investment success. It is believed that successful investing is a process. Hence, this paper mainly focuses on the use of effective success tools for the management of efficient portfolios without being dependent on forecasting methods and skills. This paper has helped to develop protocols that enhance portfolio efficiency.

·       Riding the yield curve: a variety of strategies, Bieri, D. S., & Chincarini, L. B. (2005). Journal of Fixed Income15(2), 6. This paper took into consideration the various methods that can be employed when explaining or studying the yield curve. In other to understand how the yield curve works, various strategies need to be considered and this paper did explain those strategies.

·      Effects of liquidity on the nondefault component of corporate yield spreads: evidence from intraday transactions data, Han, S., & Zhou, H. (2008). According to this research work, the effect of liquidity on the non-default component of co-operating yield spread was exclusively explained and the various method that can be employed to counter these measures was provided. The evidence of this research analyses was drawn from the Intraday Transaction Data.

·       A branch-and-cut algorithm for a traveling salesman problem with pickup and delivery, Hernández-Pérez, H., & Salazar-González, J. J. (2004). Discrete Applied Mathematics145(1), 126-139. This research thesis considered a branch and cut algorithm used for the purpose of travelling salesman problem with delivery and pickup. It also explains various problems and how they can be tackled using different means via a theoretical model.

·       Credit Risk Transfer Instruments in Central and Eastern European Countries in the Light of the Subprime Crisis, Gabriel, A. S. (2009). Conferinţa Internaţională „Management of International Business and Economics Systems, 18-19. This paper believes that the current financial crisis in the business world can primarily be connected to banking crisis as well as the wealth of the insurance sector of the economy which does not appear to be moved by the current economic situation. Although the insurance company has also been greatly affected, thus paper still believes the financial crisis has however had an increasingly outrageous impact on the insurance firms via their investment packages. This is because the financial instrument that was primarily supposed to be at the core of these difficulties served as an insurance tool (function) hence, the sufferings of the sector by this crisis.

·      FOREIGN EXCHANGE CARRY PORTFOLIOS, Bertolini, L. (2011). This paper considered the foreign exchange carrying portfolio, their pros and cons as well as the effect of this foreign exchange on the yield curve and the economy at large.

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