Dynamic Optimality of Yield Curve Strategies (Published in "International Review of Finance", Vol.4, 49-78, 2003. )
AbstractThis 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.
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Bibliographic InfoPaper provided by Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo in its series CARF F-Series with number CARF-F-013.
Length: 53 pages
Date of creation: Sep 2004
Date of revision:
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