On Bond Portfolio Management
Vladislav Kargin
TL;DR
This paper introduces a novel bond portfolio optimization method utilizing stochastic string models to analyze correlation structures, optimize allocations, and detect arbitrage opportunities in bond collections.
Contribution
It presents a new approach combining stochastic string models with Wiener-Hopf factorization for bond portfolio optimization and arbitrage detection.
Findings
Effective approximation of bond return correlation functions.
Optimal portfolio allocations computed using Wiener-Hopf factorization.
Method to identify arbitrage opportunities in bond collections.
Abstract
This paper describes a new method of bond portfolio optimization based on stochastic string models of correlation structure in bond returns. The paper shows how to approximate correlation function of bond returns, compute the optimal portfolio allocation using Wiener-Hopf factorization, and check whether a collection of bonds presents arbitrage opportunities.
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Taxonomy
TopicsStochastic processes and financial applications · Financial Markets and Investment Strategies · Monetary Policy and Economic Impact