A+ CATEGORY SCIENTIFIC UNIT

On risk minimizing strategies for default-free bond portfolio immunization

Volume 31 / 2004

Marek Kałuszka, Alina Kondratiuk-Janyska Applicationes Mathematicae 31 (2004), 259-272 MSC: 62P20, 91B28. DOI: 10.4064/am31-3-2

Abstract

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.

Authors

  • Marek KałuszkaInstitute of Mathematics
    Technical University of /Lódź
    /Zeromskiego 116
    90-924 /Lódź, Poland
    e-mail
  • Alina Kondratiuk-JanyskaInstitute of Mathematics
    Technical University of /Lódź
    /Zeromskiego 116
    90-924 /Lódź, Poland
    e-mail

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