Assets/liabilities portfolio immunization as an optimization problem

Assets/liabilities portfolio immunization as an optimization problem

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Article ID: iaor2009425
Country: Poland
Volume: 35
Issue: 2
Start Page Number: 335
End Page Number: 349
Publication Date: Jan 2006
Journal: Control and Cybernetics
Authors: ,
Keywords: programming: constraints, financial
Abstract:

The aim of the paper is to present bond portfolio immunization strategies in the case of multiple liabilities, based on single-risk or multiple-risk measure models under the assumption of multiple shocks in the term structure of interest rates, referring, in particular, to the work by Fong and Vasicek, Nawalkha and Chambers, Balbás and Ibánez, as well as Hürlimann. Immunization problem is formulated as a constrained optimization problem under a fixed open loop strategy. New risk measures associated with changes of the term structure are also defined.

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