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

Daobai Liu

International Journal of Stochastic Analysis, 2006, vol. 2006, 1-19

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.

Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnijsa:076920

DOI: 10.1155/JAMSA/2006/76920

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