Dynamic Optimality of Yield Curve Strategies

Takao Kobayashi (), Akihiko Takahashi and Norio Tokioka
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Akihiko Takahashi: Faculty of Economics, University of Tokyo
Norio Tokioka: Faculty of Economics, Seikei University.

No CIRJE-F-299, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: This paper formulates and analyzes a dynamic optimization problem of bond portfolios within Markovian Heath-Jarrow-Morton term structure models. In particular, we investigate optimal yield curve strategies analytically and numerically, and provide theoretical justification for a typical strategy which is recommended in practice for an expected change in the shape of the yield curve. In the numerical analysis, we utilize a new technique based on the asymptotic expansion approach in order to increase efficiency in computation.

Pages: 53 pages
Date: 2004-09
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http://www.cirje.e.u-tokyo.ac.jp/research/dp/2004/2004cf299.pdf (application/pdf)

Related works:
Journal Article: Dynamic Optimality of Yield Curve Strategies* (2003)
Working Paper: Dynamic Optimality of Yield Curve Strategies (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2004cf299

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