Reformation of Two Bond Portfolio Optimization Models PDF Download
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Author: Christodoulos A. Floudas
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Christodoulos A. Floudas
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
Author: Christodoulos A. Floudas
Publisher: Montréal : Groupe d'études et de recherche en analyse des décisions
ISBN:
Category :
Languages : en
Pages : 26
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Book Description
Author: Michael Puhle
Publisher: Springer Science & Business Media
ISBN: 354076593X
Category : Business & Economics
Languages : en
Pages : 143
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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: Chuan Xu
Publisher:
ISBN:
Category : Portfolio management
Languages : en
Pages : 70
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Book Description
Studies on two sides are done in this thesis. First, we consider bond portfolio optimization problem under stochastic optimization structure; second, specific algorithm to solve the problem is explored. A stochastic model for the problem is constructed. Investor is able to minimize the cost of setting up bond portfolio to cover random obligations with our model. The idea of rebalancing is introduced into our model. Investor could adjust the portfolio after he have set up the bond portfolio. Thus, we develop a two-stage stochastic programming with recourse model for bond optimization problem. Specific algorithms to solve the problem are also discussed in the thesis. We focus on simulation approach since it is able to handle special case of the problem whose random variables in constraints have continuous distribution. The key points of the approach are introduced and discussed. We successfully implement the approach on our model. Various numerical example tests with different scenario settings are carried out to see the impacts of different factors on the optimum value, optimum solution and the quality of results. The validity of our model and the efficiency of simulation approach are proved by the results. Several future research directions on this topic are also discussed in the thesis.
Author: João Caldeira
Publisher:
ISBN:
Category :
Languages : en
Pages : 49
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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: Zhenmin Fang
Publisher:
ISBN:
Category : Bonds
Languages : en
Pages : 24
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Book Description
Author: Jiří Chroustovský
Publisher:
ISBN:
Category :
Languages : en
Pages : 232
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Book Description
Author: Doina Maria Radulescu
Publisher: Springer Science & Business Media
ISBN: 3540733191
Category : Business & Economics
Languages : en
Pages : 179
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Book Description
The book suggests a novel way how the effects of tax reforms especially in the field of capital income taxation can be measured by means of dynamic computable general equilibrium (CGE) models. Using a model calibrated to the German economy, the author evaluates and quantifies the effects of introducing a Dual Income Tax (DIT) in Germany. This tax reform is a currently hotly debated topic in Germany and has been suggested both by the German Council of Economic Advisors (GCEA) and by Prof. Hans-Werner Sinn. Thus, the book is of great interest not only for the academic but also for the business world and politics.
Author: Peter J. Meindl
Publisher:
ISBN:
Category :
Languages : en
Pages : 20
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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: John Y. Campbell
Publisher: OUP Oxford
ISBN: 019160691X
Category : Business & Economics
Languages : en
Pages : 272
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Book Description
Academic finance has had a remarkable impact on many financial services. Yet long-term investors have received curiously little guidance from academic financial economists. Mean-variance analysis, developed almost fifty years ago, has provided a basic paradigm for portfolio choice. This approach usefully emphasizes the ability of diversification to reduce risk, but it ignores several critically important factors. Most notably, the analysis is static; it assumes that investors care only about risks to wealth one period ahead. However, many investors—-both individuals and institutions such as charitable foundations or universities—-seek to finance a stream of consumption over a long lifetime. In addition, mean-variance analysis treats financial wealth in isolation from income. Long-term investors typically receive a stream of income and use it, along with financial wealth, to support their consumption. At the theoretical level, it is well understood that the solution to a long-term portfolio choice problem can be very different from the solution to a short-term problem. Long-term investors care about intertemporal shocks to investment opportunities and labor income as well as shocks to wealth itself, and they may use financial assets to hedge their intertemporal risks. This should be important in practice because there is a great deal of empirical evidence that investment opportunities—-both interest rates and risk premia on bonds and stocks—-vary through time. Yet this insight has had little influence on investment practice because it is hard to solve for optimal portfolios in intertemporal models. This book seeks to develop the intertemporal approach into an empirical paradigm that can compete with the standard mean-variance analysis. The book shows that long-term inflation-indexed bonds are the riskless asset for long-term investors, it explains the conditions under which stocks are safer assets for long-term than for short-term investors, and it shows how labor income influences portfolio choice. These results shed new light on the rules of thumb used by financial planners. The book explains recent advances in both analytical and numerical methods, and shows how they can be used to understand the portfolio choice problems of long-term investors.
