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The Dynamic Canadian Debt Strategy Model

Author

Listed:
  • Nicolas Audet
  • Joe Ning
  • Adam Epp
  • Jeffrey Gao

Abstract

We present a dynamic debt strategy model framework designed to assist sovereign debt portfolio managers in choosing an optimal debt issuance strategy. The model consists of two parts: a simulation engine and a debt issuance optimization engine. The main innovation of this framework is the introduction of dynamic issuance strategies, which allow issuance decisions to vary over time based on the model’s simulated state variables. We apply this framework to Canada’s specific debt management setting and show that these dynamic strategies, when compared with the deterministic issuance strategies of the original Canadian debt strategy model, bring considerable improvements to the costs and risks of available debt portfolios.

Suggested Citation

  • Nicolas Audet & Joe Ning & Adam Epp & Jeffrey Gao, 2025. "The Dynamic Canadian Debt Strategy Model," Technical Reports 127, Bank of Canada.
    • Handle: RePEc:bca:bocatr:127
    DOI: 10.34989/tr-127
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    References listed on IDEAS

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    1. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    2. Elisa Faraglia & Albert Marcet & Rigas Oikonomou & Andrew Scott, 2019. "Government Debt Management: The Long and the Short of It," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(6), pages 2554-2604.
    3. Jarocinski, Marek, 2010. "Conditional forecasts and uncertainty about forecast revisions in vector autoregressions," Economics Letters, Elsevier, vol. 108(3), pages 257-259, September.
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    More about this item

    Keywords

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    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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