On Bond Portfolio Management
AbstractThis paper describes a new method of bond portfolio optimization based on stochastic string models of correlation structure in bond returns. The paper shows how to approximate correlation function of bond returns, compute the optimal portfolio allocation using Wiener-Hopf factorization, and check whether a collection of bonds presents arbitrage opportunities.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number math/0208130.
Date of creation: Aug 2002
Date of revision: Mar 2003
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- Zenios, Stavros A. & Holmer, Martin R. & McKendall, Raymond & Vassiadou-Zeniou, Christiana, 1998. "Dynamic models for fixed-income portfolio management under uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 22(10), pages 1517-1541, August.
- John M. Mulvey & Stavros A. Zenios, 1994. "Capturing the Correlations of Fixed-income Instruments," Management Science, INFORMS, vol. 40(10), pages 1329-1342, October.
- D. P. Kennedy, 1997. "Characterizing Gaussian Models of the Term Structure of Interest Rates," Mathematical Finance, Wiley Blackwell, vol. 7(2), pages 107-118.
- Dupacova, Jitka & Bertocchi, Marida, 2001. "From data to model and back to data: A bond portfolio management problem," European Journal of Operational Research, Elsevier, vol. 134(2), pages 261-278, October.
- Golub, Bennett & Holmer, Martin & McKendall, Raymond & Pohlman, Lawrence & Zenios, Stavros A., 1995. "A stochastic programming model for money management," European Journal of Operational Research, Elsevier, vol. 85(2), pages 282-296, September.
- D. P. Kennedy, 1994. "The Term Structure Of Interest Rates As A Gaussian Random Field," Mathematical Finance, Wiley Blackwell, vol. 4(3), pages 247-258.
- Andrea Beltratti & Andrea Consiglio & Stavros A. Zenios, 1998. "Scenario Modeling for the Management of International Bond Portfolios," Center for Financial Institutions Working Papers 98-20, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Goldstein, Robert S, 2000. "The Term Structure of Interest Rates as a Random Field," Review of Financial Studies, Society for Financial Studies, vol. 13(2), pages 365-84.
- Santa-Clara, Pedro & Sornette, Didier, 2001. "The Dynamics of the Forward Interest Rate Curve with Stochastic String Shocks," Review of Financial Studies, Society for Financial Studies, vol. 14(1), pages 149-85.
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