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Portfolio Management for a Random Field of Bond Returns

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  • Vladislav Kargin

    (Cornerstone Research)

Abstract

A new method of bond portfolio optimization is described. The method is based on stochastic string models of bond returns. It is shown how to approximate the bond return correlation function with Padé approximations and how to compute the optimal portfolio allocation using Wiener-Hopf factorization. The technique is illustrated with an example of the Treasury bond portfolio.

Suggested Citation

  • Vladislav Kargin, 2003. "Portfolio Management for a Random Field of Bond Returns," Finance 0310007, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0310007
    Note: Type of Document - PDF; prepared on IBM PC ; pages: 13 ; figures: included
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0310/0310007.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    bond portfolio management; stochastic string; Toeplitz operators; Padé approximations; Wiener-Hopf factorization.;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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