Portfolio Management for a Random Field of Bond Returns
A new method of bond portfolio optimization is described. The method is based on stochastic string models of bond returns. It is shown how to approximate the bond return correlation function with Padé approximations and how to compute the optimal portfolio allocation using Wiener-Hopf factorization. The technique is illustrated with an example of the Treasury bond portfolio.
|Date of creation:||07 Oct 2003|
|Date of revision:|
|Note:||Type of Document - PDF; prepared on IBM PC ; pages: 13 ; figures: included|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- P. Santa-Clara & D. Sornette, 1998.
"The Dynamics of the Forward Interest Rate Curve with Stochastic String Shocks,"
- Santa-Clara, Pedro & Sornette, Didier, 2001. "The Dynamics of the Forward Interest Rate Curve with Stochastic String Shocks," Review of Financial Studies, Society for Financial Studies, vol. 14(1), pages 149-85.
- Heaney, W John & Cheng, Pao L, 1984. " Continuous Maturity Diversification of Default-Free Bond Portfolios and a Generalization of Efficient Diversification," Journal of Finance, American Finance Association, vol. 39(4), pages 1101-17, September.
- Golub, Bennett & Holmer, Martin & McKendall, Raymond & Pohlman, Lawrence & Zenios, Stavros A., 1995. "A stochastic programming model for money management," European Journal of Operational Research, Elsevier, vol. 85(2), pages 282-296, September.
- D. P. Kennedy, 1994. "The Term Structure Of Interest Rates As A Gaussian Random Field," Mathematical Finance, Wiley Blackwell, vol. 4(3), pages 247-258.
- Dupacova, Jitka & Bertocchi, Marida, 2001. "From data to model and back to data: A bond portfolio management problem," European Journal of Operational Research, Elsevier, vol. 134(2), pages 261-278, October.
- Andrea Beltratti & Andrea Consiglio & Stavros Zenios, 1999.
"Scenario modeling for the management ofinternational bond portfolios,"
Annals of Operations Research,
Springer, vol. 85(0), pages 227-247, January.
- Andrea Beltratti & Andrea Consiglio & Stavros A. Zenios, 1998. "Scenario Modeling for the Management of International Bond Portfolios," Center for Financial Institutions Working Papers 98-20, Wharton School Center for Financial Institutions, University of Pennsylvania.
- D. P. Kennedy, 1997. "Characterizing Gaussian Models of the Term Structure of Interest Rates," Mathematical Finance, Wiley Blackwell, vol. 7(2), pages 107-118.
- John M. Mulvey & Stavros A. Zenios, 1994. "Capturing the Correlations of Fixed-income Instruments," Management Science, INFORMS, vol. 40(10), pages 1329-1342, October.
- Goldstein, Robert S, 2000. "The Term Structure of Interest Rates as a Random Field," Review of Financial Studies, Society for Financial Studies, vol. 13(2), pages 365-84.
- Zenios, Stavros A. & Holmer, Martin R. & McKendall, Raymond & Vassiadou-Zeniou, Christiana, 1998. "Dynamic models for fixed-income portfolio management under uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 22(10), pages 1517-1541, August.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:0310007. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.