# Risk minimizing strategies for a portfolio of interest-rate securities

Banach Center Publications (2008)

- Volume: 83, Issue: 1, page 195-212
- ISSN: 0137-6934

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topAndrzej 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 -

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