On risk minimizing strategies for default-free bond portfolio immunization
This paper presents new strategies for bond portfolio immunization which combine the time-honored duration with the M-Absolute measure defined by Nawalkha and Chambers (1996). The innovation consists in considering an average shock in a fixed time period as a random variable with mean $\mu $ or, alternatively, with normal distribution with mean $\mu $ and variance $\sigma ^2$. Additionally, an extension to arbitrage free models of polynomial shocks is provided. Moreover, the Fisher and Weil model, the M-Absolute strategy and a new one are compared empirically with respect to financial liquidity.