Wilfrid Laurier

The performance of the shares of a closed end bond fund is based on the returns of an underlying portfolio of bonds. The returns on closed end bond funds are typically higher than those of comparable open ended bond funds and this result is attributed to the use of leverage by closed end bond funds. This talk develops a simple model to assess the impact of leverage on the expected return and riskiness of a closed end bond fund. We illustrate the model with some examples