| Bond Portfolio Optimization 2008 Edition Contributor(s): Puhle, Michael (Author) |
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ISBN: 3540765921 ISBN-13: 9783540765929 Publisher: Springer OUR PRICE: $94.99 Product Type: Paperback - Other Formats Published: January 2008 Annotation: 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. |
| Additional Information |
| BISAC Categories: - Business & Economics | Finance - General - Mathematics | Linear & Nonlinear Programming - Business & Economics | Operations Research |
| Dewey: 658.1 |
| Series: Lecture Notes in Economic and Mathematical Systems |
| Physical Information: 0.39" H x 6.19" W x 9.18" (0.59 lbs) 140 pages |
| Descriptions, Reviews, Etc. |
| Publisher Description: 1 The tools of modern portfolio theory are in general use in the equity markets, either in the form of portfolio optimization software or as an accepted frame- 2 work in which the asset managers think about stock selection. In the ?xed income market on the other hand, these tools seem irrelevant or inapplicable. Bond portfolios are nowadays mainly managed by a comparison of portfolio 3 4 risk measures vis a vis a benchmark. The portfolio manager's views about the future evolution of the term structure of interest rates translate th- selves directly into a positioning relative to his benchmark, taking the risks of these deviations from the benchmark into account only in a very crude 5 fashion, i.e. without really quantifying them probabilistically. This is quite surprising since sophisticated models for the evolution of interest rates are commonly used for interest rate derivatives pricing and the derivation of ?xed 6 income risk measures. Wilhelm (1992) explains the absence of modern portfolio tools in the ?xed 7 income markets with two factors: historically relatively stable interest rates and systematic di?erences between stocks and bonds that make an application of modern portfolio theory di-cult. These systematic di?erences relate mainly to the ?xed maturity of bonds. Whereas possible future stock prices become more dispersed as the time horizon widens, the bond price at maturity is 8 ?xed. This implies that the probabilistic models for stocks and bonds have 1 Starting with the seminal work of Markowitz (1952). |