A theory of bond portfolios
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Publication:558672
DOI10.1214/105051605000000160zbMATH Open1125.91051arXivmath/0301278OpenAlexW2260308503MaRDI QIDQ558672FDOQ558672
Publication date: 13 July 2005
Published in: The Annals of Applied Probability (Search for Journal in Brave)
Abstract: We introduce a bond portfolio management theory based on foundations similar to those of stock portfolio management. A general continuous-time zero-coupon market is considered. The problem of optimal portfolios of zero-coupon bonds is solved for general utility functions, under a condition of no-arbitrage in the zero-coupon market. A mutual fund theorem is proved, in the case of deterministic volatilities. Explicit expressions are given for the optimal solutions for several utility functions.
Full work available at URL: https://arxiv.org/abs/math/0301278
Stochastic calculus of variations and the Malliavin calculus (60H07) Optimality conditions and duality in mathematical programming (90C46) Existence of optimal solutions to problems involving randomness (49J55)
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