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Dynamic Optimality of Yield Curve Strategies (Published in "International Review of Finance", Vol.4, 49-78, 2003. )

Author

Listed:
  • Takao Kobayashi

    (Faculty of Economics, University of Tokyo)

  • Akihiko Takahashi

    (Faculty of Economics, University of Tokyo)

  • Norio Tokioka

    (Faculty of Economics, Seikei University.)

Abstract

This 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.

Suggested Citation

  • Takao Kobayashi & Akihiko Takahashi & Norio Tokioka, 2004. "Dynamic Optimality of Yield Curve Strategies (Published in "International Review of Finance", Vol.4, 49-78, 2003. )," CARF F-Series CARF-F-013, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  • Handle: RePEc:cfi:fseres:cf013
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