Bucket

Dictionary Says

Definition of 'Bucket'

1. A group of swaps with similar or identical maturities.

2. Any group of securities with a similar level of risk. An investment strategy called the “bucket approach,” developed by Nobel Memorial Prize winner James Tobin, recommends dividing investments into high-risk and low-risk “buckets” and then trying to achieve the highest possible return for each bucket.
Investopedia Says

Investopedia explains 'Bucket'

1. Buckets can be used to assess the sensitivity of a portfolio of swaps to changes in interest rates. Once risk (called “bucket exposure”) has been determined (through a process called “bucket analysis”), the investor may choose to hedge that risk if it is cost-effective to do so. A strategy called immunization can be used to create a perfect hedge against all bucket exposures.

2. Tobin's strategy called for alloting stocks between a "risky bucket" and a "safe bucket". However, other proponents of the bucket strategy use up to five buckets in their variation of this approach.

Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. James Tobin

    An American ...
  2. Currency Swap

    A swap that ...
  3. Debt For Bond Swap

    A debt swap ...
  4. Forward Swap

    A swap agreement ...
  5. Interest Rate Swap

    An agreement ...
  6. Quanto Swap

    A swap with ...
  7. Reverse Swap

    An exchange of ...
  8. Rollercoaster Swap

    A seasonal swap ...
  9. Swap

    Traditionally, ...
  10. Total Return Swap

    A swap agreement ...

Articles Of Interest

  1. A Sanity-Saving Retirement Stock Portfolio

    The market rollercoaster has many retirees calling it quits on stocks. Big mistake.
  2. An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.
  3. The Barnyard Basics Of Derivatives

    This tale of a fictional chicken farm is a great way to learn how derivatives work in the market.
  4. How Companies Use Derivatives To Hedge Risk

    Derivatives can reduce the risks associated with changes in foreign exchange rates, interest rates and commodity prices.
  5. Are Derivatives Safe For Retail Investors?

    These vehicles have gotten a bad rap in the press. Find out whether they deserve it.
  6. A Guide To Real Estate Derivatives

    These instruments provide exposure to the real estate market without having to buy and sell property.
  7. Credit Default Swaps: An Introduction

    This derivative can help manage portfolio risk, but it isn't a simple vehicle.
  8. Should You Invest Your Entire Portfolio In Stocks?

    It is true that stocks outperform bonds and cash in the long run, but that statistic doesn't tell the whole story.
  9. The Uses And Limits Of Volatility

    Check out how the assumptions of theoretical risk models compare to actual market performance.
  10. Risk Tolerance Only Tells Half The Story

    Just because you're willing to accept a risk, doesn't mean you always should.

comments powered by Disqus
Recommended
Loading, please wait...
Trading Center