A theory of bond portfolios
We 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.
|Date of creation:||Jan 2003|
|Date of revision:||May 2005|
|Publication status:||Published in Annals of Applied Probability 2005, Vol. 15, No. 2, 1260-1305|
|Contact details of provider:|| Web page: http://arxiv.org/|
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