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Analiza wartości prawa użytkowania wieczystego gruntu. How to find a bond portfolio with the highest convexity in a class of fixed duration portfolios (RB-1998-61-01)

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Title Analiza wartości prawa użytkowania wieczystego gruntu. How to find a bond portfolio with the highest convexity in a class of fixed duration portfolios (RB-1998-61-01)
Persons Authors: Leszek Saturnin Zaremba, Włodzimierz Henryk Smoleński
Partner: Systems Research Institute Polish Academy of Sciences, Warsaw
Description This paper extends the main result, that is, the construction of an immunization strategy with the highest convexity to a more general setting by dropping the key assumption stating that interest rate shocks h_t to occur in a near future are proportional to the values of spot rates y_t plus 1, that is, the condition (2) holds. Here, the interest rate shifts h_t axe allowed to be of the more general type (1) with known (to an investor) coefficients g_t's (usually estimated empirically based on historical data). The optimal portfolio Z* is found here in a rigorous way by means of the Kuhn-Tucker conditions. Due to a higher complexity of the problem, the presented reasoning does not follow the lines of that of [2], what results in a different, not intuitively clear (as opposed to [2]) solution. It is demonstrated how to find in a computationally very simple way a bond portfolio Z* with the highest convexity in a class, say Z, of fixed duration portfolios. When the convexity of Z* is larger than the convexity of a certain zero coupon bond B_K, then Z* has the highest convexity in the class K of so-called K-immunization strategies. In this way, we simultaneously solve the problem of maximization of the unanticipated rate of return on a bond portfolio due to shocks in spot rates in the class Z and also K if, in addition, the convexity of Z* exceeds that of B_K. (English)
Keywords "convexity"@en, "Immunization"@en, "wypukłość"@pl, "unanticipated rate of return"@en, "immunizacja"@pl, "nieoczekiwana stopa zwrotu"@pl
Classification Resource type: article, chapter
Scientific discipline: Dziedzina nauk społecznych / ekonomia i finanse (2018)
Destination group: pupils, students, scientists
Harmful content: No
Characteristics Title of source document: RB-1998-61-01
Place of publication: Warszawa
Publisher: IBSPAN
Time of publication: 1998
From page: 1
To page: 7
Resource language: English
License CC BY-SA 4.0
Technical information Submitter: Anna Wasilewska
Availability date: 26-07-2022
Collections Kolekcja Instytutu Badań Systemowych PAN w Warszawie

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Leszek Saturnin Zaremba, Włodzimierz Henryk Smoleński. Analiza wartości prawa użytkowania wieczystego gruntu. How to find a bond portfolio with the highest convexity in a class of fixed duration portfolios (RB-1998-61-01). [article, chapter] Available in Atlas of Open Science Resources, . License: CC BY-SA 4.0, https://creativecommons.org/licenses/by-sa/4.0/legalcode.pl. Date of access: DD.MM.RRRR.

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