Economics at your fingertips  

Portfolio selection strategy for fixed income markets with immunization on average

Sergio Ortobelli (), Sebastiano Vitali, Marco Cassader and Tomáš Tichý ()
Additional contact information
Sergio Ortobelli: University of Bergamo
Sebastiano Vitali: University of Bergamo
Marco Cassader: University of Bergamo
Tomáš Tichý: Technical University Ostrava

Annals of Operations Research, 2018, vol. 260, issue 1, 395-415

Abstract: Abstract In this paper, we develop a portfolio optimization method to maximize the performance of a fixed income portfolio. To achieve this aim, we define a two-step optimization problem where we firstly manage the immunization risk and then we maximize the portfolio wealth in a reward–risk framework. In the first optimization step, we create funds of bonds with constant immunization measure over time, and we propose an innovative immunization measure for bond portfolio management that leads to a more flexible immunization approach and a better trade-off between reward and risk. In the second optimization step, maximizing two performance measures on these baskets of bonds we obtain portfolio strategies that consider different investors’ profiles. An empirical application to the US fixed income market during 2002–2012 period is provided. Applying the portfolio optimization method to different bond classes, we compare the results with an equity index. This ex-post analysis indicates the benefits of the proposed portfolio strategy in outperforming the benchmark and proves that capital flows to safer markets during crisis periods.

Keywords: Investment analysis; Portfolio selection; Fixed income market; Immunization on average (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Annals of Operations Research is currently edited by Endre Boros

More articles in Annals of Operations Research from Springer
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2019-05-21
Handle: RePEc:spr:annopr:v:260:y:2018:i:1:d:10.1007_s10479-016-2182-8