OPTIMAL PORTFOLIOS OF CORPORATE BONDS AND HOLD TO MATURITY STRATEGIES

Yaacov Kopeliovich ()
Additional contact information
Yaacov Kopeliovich: Department of Finance, University of Connecticut, Storrs, Connecticut 06239, USA

Annals of Financial Economics (AFE), 2015, vol. 10, issue 02, 1-34

Abstract: In this paper, we initiate a research on optimal bond portfolios, that are held to their maturity. We solve the problem analytically for log utility investor in the case of one risky corporate asset. We compare the behavior of these portfolios to equally weighted and portfolios with randomly selected weights. We apply simulation based on Vasicek’s copula approach to derive optimal weights for a corresponding problem involving more than one corporate bond. Further we discover that these portfolios outperform naive investment in constant maturity (CCM) bond indices with a similar maturity horizon. We explain possible application of our findings to boost asset liability management (ALM) strategies for pensions and insurance companies.

Keywords: Optimal portfolios; mean variance hold to maturity; equally weighted benchmark; constant maturity indices (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S2010495215500104
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:afexxx:v:10:y:2015:i:02:n:s2010495215500104

Ordering information: This journal article can be ordered from

DOI: 10.1142/S2010495215500104

Access Statistics for this article

Annals of Financial Economics (AFE) is currently edited by Michael McAleer

More articles in Annals of Financial Economics (AFE) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().