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Dynamic Optimality of Yield Curve Strategies-super-

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Author Info

  • Takao Kobayashi
  • Akihiko Takahashi
  • Norio Tokioka

Abstract

This paper formulates and analyzes a dynamic optimization problem of bond portfolios within Markovian Heath-Jarrow-Morton term structure models. In particular, we investigate optimal yield curve strategies analytically and numerically, and provide theoretical justification for a typical strategy which is recommended in practice for an expected change in the shape of the yield curve. In the numerical analysis, we utilize a new technique based on the "asymptotic expansion approach" in order to increase efficiency in computation. Copyright (c) International Review of Finance Ltd. 2003.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1369-412X.2003.00043.x
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Bibliographic Info

Article provided by International Review of Finance Ltd. in its journal International Review of Finance.

Volume (Year): 4 (2003)
Issue (Month): 1-2 ()
Pages: 49-78

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Handle: RePEc:bla:irvfin:v:4:y:2003:i:1-2:p:49-78

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1369-412X

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Cited by:
  1. Keita Nakayama & Akihiko Takahashi, 2007. "A Factor Allocation Approach to Optimal Bond Portfolio," CIRJE F-Series CIRJE-F-494, CIRJE, Faculty of Economics, University of Tokyo.
  2. Akihiko Takahashi & Kohta Takehara, 2007. "An Asymptotic Expansion Approach to Currency Options with a Market Model of Interest Rates under Stochastic Volatility Processes of Spot Exchange Rates," Asia-Pacific Financial Markets, Springer, vol. 14(1), pages 69-121, March.
  3. Keita Nakayama & Akihiko Takahashi, 2007. "A Factor Allocation Approach to Optimal Bond Portfolio," Asia-Pacific Financial Markets, Springer, vol. 14(4), pages 299-324, December.

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