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Option-based risk management of a bond portfolio under regime switching interest rates

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  • Fabio Antonelli
  • Alessandro Ramponi
  • Sergio Scarlatti

Abstract

In the present paper, we assume an economy with regime switching short rates and show how the Value at Risk of a financial position on zero-coupon bonds, hedged by buying protective put options under budget constraints, can be minimized by selecting optimal (regime-dependent) strike prices. Copyright Springer-Verlag 2013

Suggested Citation

  • Fabio Antonelli & Alessandro Ramponi & Sergio Scarlatti, 2013. "Option-based risk management of a bond portfolio under regime switching interest rates," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 36(1), pages 47-70, May.
    • Handle: RePEc:spr:decfin:v:36:y:2013:i:1:p:47-70
    DOI: 10.1007/s10203-011-0123-1
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    Cited by:

    1. Alessandro Ramponi, 2012. "Computing Quantiles in Regime-Switching Jump-Diffusions with Application to Optimal Risk Management: a Fourier Transform Approach," Papers 1207.6759, arXiv.org.

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