Scenario modeling for the management ofinternational bond portfolios
Andrea Consiglio () and
Stavros Zenios ()
Annals of Operations Research, 1999, vol. 85, issue 0, 227-247
We address the problem of portfolio management in the international bond markets.Interest rate risk in the local market, exchange rate volatility across markets, and decisionsfor hedging currency risk are integral parts of this problem. The paper develops a stochasticprogramming optimization model for integrating these decisions in a common framework.Monte Carlo simulation procedures, calibrated using historical observations of volatilityand correlation data, generate jointly scenarios of interest and exchange rates. The decisionmaker's risk tolerance is incorporated through a utility function, and additional views onmarket outlook can also be incorporated in the form of user specified scenarios. The modelprescribes optimal asset allocation among the different markets and determines bond‐pickingdecisions and appropriate hedging ratios. Therefore, several interrelated decisions are castin a common framework, while in the past these issues were addressed separately. Empiricalresults illustrate the efficacy of the simulation models in capturing the uncertainties of theSalomon Brothers international bond market index. Copyright Kluwer Academic Publishers 1999
References: Add references at CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
Working Paper: Scenario Modeling for the Management of International Bond Portfolios (1998)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:spr:annopr:v:85:y:1999:i:0:p:227-247:10.1023/a:1018973828120
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 ().