Bond portfolio immunization is a classical issue in finance. Since Macaulaygave the concept of duration in 1938, many scholars proposed different kinds of duration immunization models. In the literature of bond portfo...Bond portfolio immunization is a classical issue in finance. Since Macaulaygave the concept of duration in 1938, many scholars proposed different kinds of duration immunization models. In the literature of bond portfolio immunization usingmultifactor model, to the best of our knowledge, researchers only use the first-orderimmunization, which is usually called as duration immunization, and no one hasconsidered second-order effects in immunization, which is well known as “convexity” in the case of single-factor model. In this paper, we introduce the second-orderinformation associated with multifactor model into bond portfolio immunization andreformulate the corresponding problems as tractable semidefinite programs. Bothsimulation analysis and empirical study show that the second-order immunization strategies exhibit more accurate approximation to the value change of bonds and thusresult in better immunization performance.展开更多
基金This research is partially supported by the National Natural Science Foundation of China(Nos.71471180 and 71571062).
文摘Bond portfolio immunization is a classical issue in finance. Since Macaulaygave the concept of duration in 1938, many scholars proposed different kinds of duration immunization models. In the literature of bond portfolio immunization usingmultifactor model, to the best of our knowledge, researchers only use the first-orderimmunization, which is usually called as duration immunization, and no one hasconsidered second-order effects in immunization, which is well known as “convexity” in the case of single-factor model. In this paper, we introduce the second-orderinformation associated with multifactor model into bond portfolio immunization andreformulate the corresponding problems as tractable semidefinite programs. Bothsimulation analysis and empirical study show that the second-order immunization strategies exhibit more accurate approximation to the value change of bonds and thusresult in better immunization performance.
