Immunization and the Optimal Structure of the Balance Sheet

Yaffa Machnes ()
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Yaffa Machnes: Bar-Ilan University, Department of Economics

A chapter in Advances in Stochastic Modelling and Data Analysis, 1995, pp 57-73 from Springer

Abstract: Abstract Investors such as insurance companies or pension funds have future liabilities and keep reserves in bonds. They face the risk of multiperiod interest rate changes and plan to buy bonds according to their estimations of future liabilities and interest rates. We use a discrete time model and show that the choice of the length of the bonds bought or sold determines a kinked payoff function. For investors who adopt a mean-variance strategy, hedging may be a common solution.

Keywords: Financial planning; Portfolio theory (search for similar items in EconPapers)
Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-94-017-0663-6_3

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DOI: 10.1007/978-94-017-0663-6_3

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