Risk minimizing strategies for a portfolio of interest-rate securities

Andrzej Palczewski. "Risk minimizing strategies for a portfolio of interest-rate securities." Banach Center Publications 83.1 (2008): 195-212. <http://eudml.org/doc/282143>.

@article{AndrzejPalczewski2008,
abstract = {The paper presents an application of stochastic control methods to fixed income management in an incomplete market with external economic factors. The objective of an investor is the minimization of a shortfall risk. The problem is reduced to the multidimensional Bellman equation. It is shown that for a large class of loss functions the equation possesses a continuous solution. We also consider loss functions from the HARA class and prove that for such functions the Hamilton-Jacobi-Bellman equation has a sufficiently smooth solution. This solution guarantees the existence of a well defined investment strategy. A special example of the bond portfolio with interest rates governed by the Gaussian HJM model is solved explicitly.},
author = {Andrzej Palczewski},
journal = {Banach Center Publications},
keywords = {optimal portfolios; asset-liability management; stochastic interest rate},
language = {eng},
number = {1},
pages = {195-212},
title = {Risk minimizing strategies for a portfolio of interest-rate securities},
url = {http://eudml.org/doc/282143},
volume = {83},
year = {2008},
}

TY - JOUR
AU - Andrzej Palczewski
TI - Risk minimizing strategies for a portfolio of interest-rate securities
JO - Banach Center Publications
PY - 2008
VL - 83
IS - 1
SP - 195
EP - 212
AB - The paper presents an application of stochastic control methods to fixed income management in an incomplete market with external economic factors. The objective of an investor is the minimization of a shortfall risk. The problem is reduced to the multidimensional Bellman equation. It is shown that for a large class of loss functions the equation possesses a continuous solution. We also consider loss functions from the HARA class and prove that for such functions the Hamilton-Jacobi-Bellman equation has a sufficiently smooth solution. This solution guarantees the existence of a well defined investment strategy. A special example of the bond portfolio with interest rates governed by the Gaussian HJM model is solved explicitly.
LA - eng
KW - optimal portfolios; asset-liability management; stochastic interest rate
UR - http://eudml.org/doc/282143
ER -