A theory of bond portfolios
AbstractWe introduce a bond portfolio management theory based on foundations similar to those of stock portfolio management. A general continuous-time zero-coupon market is considered. The problem of optimal portfolios of zero-coupon bonds is solved for general utility functions, under a condition of no-arbitrage in the zero-coupon market. A mutual fund theorem is proved, in the case of deterministic volatilities. Explicit expressions are given for the optimal solutions for several utility functions.
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Bibliographic InfoPaper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/6041.
Date of creation: 2005
Date of revision:
Publication status: Published in Annals of Applied Probability, 2005, Vol. 15, no. 2. pp. 1260-1305.Length: 45 pages
Bond portfolios; optimal portfolios; utility optimization; Roll-overs; Hilbert space valued processes;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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