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Author: Michael Puhle Publisher: Springer Science & Business Media ISBN: 354076593X Category : Business & Economics Languages : en Pages : 143
Book Description
The book analyzes how modern portfolio theory and dynamic term structure models can be applied to government bond portfolio optimization problems. The author studies the necessary adjustments, examines the models with regard to the plausibility of their results and compares the outcomes to portfolio selection techniques used by practitioners. Both single-period and continuous-time bond portfolio optimization problems are considered.
Author: Michael Puhle Publisher: Springer Science & Business Media ISBN: 354076593X Category : Business & Economics Languages : en Pages : 143
Book Description
The book analyzes how modern portfolio theory and dynamic term structure models can be applied to government bond portfolio optimization problems. The author studies the necessary adjustments, examines the models with regard to the plausibility of their results and compares the outcomes to portfolio selection techniques used by practitioners. Both single-period and continuous-time bond portfolio optimization problems are considered.
Author: Lev Dynkin Publisher: Princeton University Press ISBN: 069120277X Category : Business & Economics Languages : en Pages : 998
Book Description
The practice of institutional bond portfolio management has changed markedly since the late 1980s in response to new financial instruments, investment methodologies, and improved analytics. Investors are looking for a more disciplined, quantitative approach to asset management. Here, five top authorities from a leading Wall Street firm provide practical solutions and feasible methodologies based on investor inquiries. While taking a quantitative approach, they avoid complex mathematical derivations, making the book accessible to a wide audience, including portfolio managers, plan sponsors, research analysts, risk managers, academics, students, and anyone interested in bond portfolio management. The book covers a range of subjects of concern to fixed-income portfolio managers--investment style, benchmark replication and customization, managing credit and mortgage portfolios, managing central bank reserves, risk optimization, and performance attribution. The first part contains empirical studies of security selection versus asset allocation, index replication with derivatives and bonds, optimal portfolio diversification, and long-horizon performance of assets. The second part covers portfolio management tools for risk budgeting, bottom-up risk modeling, performance attribution, innovative measures of risk sensitivities, and hedging risk exposures. A first-of-its-kind publication from a team of practitioners at the front lines of financial thinking, this book presents a winning combination of mathematical models, intuitive examples, and clear language.
Author: Christodoulos A. Floudas Publisher: Montréal : Groupe d'études et de recherche en analyse des décisions ISBN: Category : Languages : en Pages : 26
Author: João Caldeira Publisher: ISBN: Category : Languages : en Pages : 49
Book Description
Dynamic factor models for the yield curve have been extensively applied to fit and forecast the yield curve. We propose a novel utilization of these models in bond portfolio optimization. Specifically, we derive closed-form expressions for the vector of expected bond returns and for its covariance matrix based on a general class of dynamic factor models, and use these expressions to obtain optimal mean-variance bond portfolios. We also develop a duration-constrained, mean-variance optimization, which can be used to improve bond indexing. An empirical application involving two large data sets of U.S. Treasuries with different characteristics shows that the proposed portfolio policy outperforms a broad set of traditional yield curve strategies used in bond desks in terms of higher Sharpe ratios. Moreover, we find that an investor with a quadratic utility function is willing to pay a performance fee to adopt the proposed mean-variance bond portfolios. Finally, we discuss how an investor can benefit from adopting a dynamic rule to switch among alternative bond investment strategies. We find that the benefits of such dynamic portfolio selection rule are even more pronounced when the set of available policies is augmented with the proposed mean-variance portfolios.
Author: Peter J. Meindl Publisher: ISBN: Category : Languages : en Pages : 20
Book Description
Although much research has been devoted to portfolio optimization, starting with the seminal work of Markowitz (1952), relatively little has been focused on corporate bond portfolio optimization, particularly when there are multiple bonds in which to invest. In this paper, we propose a methodology addressing the problem of corporate bond portfolio optimization in a multi-period environment with transaction costs. We model interest rates using a classic CIR process and we model the defaultable bonds using a reduced form model. In this model, risk neutral default intensities evolve according to a CIR process with the Brownian motion terms correlated across the bonds. The bonds are then valued using the basic affine model of Duffie and Singleton (2003). Bond price paths are created using this affine model along with a translation from risk neutral probabilities to physical default probabilities to determine whether or not default has occurred in a period. Our portfolio optimization methodology melds simple binomial tree optimization with a technique from control theory called receding horizon control (RHC) which is used for solving large, computationally difficult problems. This methodology can accommodate a wide variety of bond dynamics beyond those mentioned above as well as a wide variety of performance objectives. Essentially, this methodology breaks down the portfolio optimization problem into a sequence of problems solved over time which allows one to incorporate changes in the system dynamics and to overcome issues of computational complexity. Through Monte Carlo simulation we demonstrate results showing our methodology can significantly outperform the bond portfolio methodology of holding a constant proportion of the portfolio in each bond. Note that this research is ongoing and thus this paper does not contain the complete analysis that will be done by the summer of 2006.
Author: Frank J. Fabozzi Publisher: John Wiley & Sons ISBN: 0471785768 Category : Business & Economics Languages : en Pages : 578
Book Description
In order to effectively employ portfolio strategies that can control interest rate risk and/or enhance returns, you must understand the forces that drive bond markets, as well as the valuation and risk management practices of these complex securities. In Advanced Bond Portfolio Management, Frank Fabozzi, Lionel Martellini, and Philippe Priaulet have brought together more than thirty experienced bond market professionals to help you do just that. Divided into six comprehensive parts, Advanced Bond Portfolio Management will guide you through the state-of-the-art techniques used in the analysis of bonds and bond portfolio management. Topics covered include: General background information on fixed-income markets and bond portfolio strategies The design of a strategy benchmark Various aspects of fixed-income modeling that will provide key ingredients in the implementation of an efficient portfolio and risk management process Interest rate risk and credit risk management Risk factors involved in the management of an international bond portfolio Filled with in-depth insight and expert advice, Advanced Bond Portfolio Management is a valuable resource for anyone involved or interested in this important industry.
Author: Michael Puhle
Author: Michael Puhle
Author: 
Author: Olaf Korn
Author: Lev Dynkin
Author: Christodoulos A. Floudas
Author: Martin L. Leibowitz
Author: João Caldeira
Author: Peter J. Meindl
Author: Christodoulos A. Floudas
Author: Frank J. Fabozzi