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Optimum Bond Portfolio Selections

Author

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  • Pao Lun Cheng

    (The University of Massachusetts, Amherst, Massachusetts)

Abstract

This paper is concerned with adapting Dr. Harry M. Markowitz's work on optimum portfolio selection of equity issues to portfolio selection of debt issues for achieving optimum maturity distribution. In establishing the optimum, investor's "tactics" take place of individual securities in Markowitz's analysis. An investor can choose from sets of efficient tactics either to minimize the variance of portfolio return or to maximize expected portfolio return. The model requires similar computational methods advanced by Markowitz himself and by others. It presents an exploration of techniques needed to optimize bond portfolio of financial firms in a way which will allow funds to be re-invested at minimum opportunity loss.

Suggested Citation

  • Pao Lun Cheng, 1962. "Optimum Bond Portfolio Selections," Management Science, INFORMS, vol. 8(4), pages 490-499, July.
    • Handle: RePEc:inm:ormnsc:v:8:y:1962:i:4:p:490-499
    DOI: 10.1287/mnsc.8.4.490
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    Cited by:

    1. Sergio Ortobelli & Sebastiano Vitali & Marco Cassader & Tomáš Tichý, 2018. "Portfolio selection strategy for fixed income markets with immunization on average," Annals of Operations Research, Springer, vol. 260(1), pages 395-415, January.
    2. Vukovic, Darko & Vyklyuk, Yaroslav & Matsiuk, Natalia & Maiti, Moinak, 2020. "Neural network forecasting in prediction Sharpe ratio: Evidence from EU debt market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 542(C).
    3. P. Xidonas & C. Hassapis & G. Bouzianis & C. Staikouras, 2018. "An Integrated Matching-Immunization Model for Bond Portfolio Optimization," Computational Economics, Springer;Society for Computational Economics, vol. 51(3), pages 595-605, March.
    4. Iliya Markov & Rodrigue Oeuvray & Nils Tuchschmid, 2013. "Non-fully invested derivative-free bond index replication," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 27(1), pages 101-124, March.

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