Bond portfolio's duration and investment term-structure management problem

Liu, Daobai

doi:https://doi.org/10.1155/JAMSA/2006/76920

International Journal of Stochastic Analysis

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Volume 2006 | Article ID 076920 | https://doi.org/10.1155/JAMSA/2006/76920

Bond portfolio's duration and investment term-structure management problem

Daobai Liu¹

Received30 Nov 2004

Revised25 Apr 2005

Accepted27 Apr 2005

Published07 May 2006

Abstract

In the considered bond market, there are N zero-coupon bonds transacted continuously, which will mature at equally spaced dates. A duration of bond portfolios under stochastic interest rate model is introduced, which provides a measurement for the interest rate risk. Then we consider an optimal bond investment term-structure management problem using this duration as a performance index, and with the short-term interest rate process satisfying some stochastic differential equation. Under some technique conditions, an optimal bond portfolio process is obtained.

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Copyright

Copyright © 2006 Daobai Liu. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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