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A theory of bond portfolios

Ekeland, Ivar; Taflin, Erik (2005), A theory of bond portfolios, The Annals of Applied Probability, 15, 2, p. 1260-1305

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Type
Article accepté pour publication ou publié
External document link
http://projecteuclid.org/euclid.aoap/1115137975
Date
2005
Journal name
The Annals of Applied Probability
Volume
15
Number
2
Publisher
Institute of Mathematical Statistics
Pages
1260-1305
Metadata
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Author(s)
Ekeland, Ivar
Taflin, Erik cc
Abstract (EN)
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.
Subjects / Keywords
Bond portfolios; optimal portfolios; utility optimization; Roll-overs; Hilbert space valued processes
JEL
G11 - Portfolio Choice; Investment Decisions