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Self‐Financing Trading Strategies for Sliding, Rolling‐Horizon, and Consol Bonds

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  • Marek Rutkowski

Abstract

The time evolution of a sliding bond is studied in discrete‐ and continuous‐time setups. By definition, a sliding bond represents the price process of a discount bond with a fixed time to maturity. Examples of measure‐valued trading strategies (introduced by Bj"ork et al. 1997a, 1997b) which are based on the price process of a sliding bond are discussed. In particular, a self‐financing strategy that involves holding at any time one unit of a sliding bond is examined (the wealth process of this strategy is referred to as the rolling‐horizon bond). In contrast to the sliding bond, which does not represent a tradable security, the rolling‐horizon bond (or the rolling‐consol bond) may play the role of a fixed‐income security with infinite lifespan in portfolio management problems.

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  • Marek Rutkowski, 1999. "Self‐Financing Trading Strategies for Sliding, Rolling‐Horizon, and Consol Bonds," Mathematical Finance, Wiley Blackwell, vol. 9(4), pages 361-385, October.
    • Handle: RePEc:bla:mathfi:v:9:y:1999:i:4:p:361-385
    DOI: 10.1111/1467-9965.00074
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    Cited by:

    1. Szymon Peszat & Dariusz Zawisza, 2020. "The investor problem based on the HJM model," Papers 2010.13915, arXiv.org, revised Dec 2021.

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