Portfolio optimization under credit risk

DOI10.1007/BF03354601MaRDI QIDQ1424641zbMATH OpenOpenAlexFDO

Authors R. Zagst, Jan Kerhrbaum, Bernd Schmid

Publication date 16 March 2004

Published in Computational Statistics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1007/bf03354601

zbMATH Keywords

defaultable bond pricelinear mixed-integer programminguncertainty index

Mathematics Subject Classification ID

Mixed integer programming (90C11) Statistical methods; economic indices and measures (91B82) Portfolio theory (91G10)

Review text

A financial market model is considered which describes the dynamics of the non-defaultable short rate (\(r\)), the defaultable short rate (\(s\)) and the uncertainty index (\(u\)). Stochastic differential equations by a standard Brownian motion are used to describe \((r(t),s(t),u(t))\). The prices of non-defaultable and defaultable discount bonds are evaluated. The problem of portfolio optimization in this model is reduced to a linear mixed-integer programming problem. An application to the portfolio of German, Italy and Greece sovereign bonds is discussed.

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Cites work

• Interest-rate management
• Pricing interest-rate-derivative securities

Cited in

(18)

• Credit portfolio risk and asset price cycles
• Portfolio diversification in the sovereign credit swap markets
• On the simulation of portfolios of interest rate and credit risk sensitive securities
• Portfolio optimization of credit swap under funding costs
• Integrated portfolio management with options
• On hedging the risk of default caused by changes of interest rates
• A problem of managing the credit portfolio
• Robust optimization of credit portfolios
• OPTIMAL CREDIT RATINGS
• Portfolio Choice with Market--Credit-Risk Dependencies
• Hedging market and credit risk in corporate bond portfolios
• Efficient frontier cutoff policies in credit portfolios
• Portfolio Optimization for Credit-Risky Assets under Marshall–Olkin Dependence
• scientific article; zbMATH DE number 5494121 (Why is no real title available?)
• Discovery of Risk-Return Efficient Structures in Middle-Market Credit Portfolios
• scientific article; zbMATH DE number 5247435 (Why is no real title available?)
• OPTIMAL PORTFOLIOS WITH DEFAULTABLE SECURITIES A FIRM VALUE APPROACH
• Bond portfolio optimization with long-range dependent credits

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