Selection of a fixed-income portfolio

Kan, Yu. S.; Krasnopol'Skaya, A. N.

doi:10.1134/s0005117906040072

Cited by 3 publications

(2 citation statements)

References 5 publications

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“…Similarly to (19), the probability constraint (23) can be replaced with a stronger one by using the upper-bound estimates for the probability P …”

Section: Minimizing the Monetary Reserve (Var) That Ensures The Satismentioning

confidence: 99%

“…Though this work had not become widely popular, Roy's ideas continued to develop, for example, in [4] (average return is maximized under a constrained probability of deriving an income less than a prescribed threshold), [5] (some quantile of return is optimized), [6] (income is maximized and the probability that income is less than a prescribed thereshold is minimized), [7] (lexicographic SF-principle is used), [8] (multiperiod SF-optimization is considered), [9] (the estimate of the probability of receiving less income with the use of extremum distributions is employed), [10] (the probability of exceeding a objective level of income is maximized and the probability of not exceeding a given level of income is minimized), [11,12] (applications of the SF-optimization to portfolios with high-risk assets are considered). In [13][14][15][16][17][18][19], A. I. Kibzun, Yu. S. Kan, et al analyze optimal control problems for a financial portfolio with a quantile objective criterion closely related to the probability of not exceeding a prescribed return.…”

Section: Introductionmentioning

confidence: 99%

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Safety-first portfolio selection

Norkin

Boyko

2012

Cybern Syst Anal

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A. D. Roy's safety-first (SF) approach to financial portfolio optimization is improved. Safety first means the minimization of the probability of negative returns. The improvement concerns a better estimation of the negative return probabilities by means of mean excess return risk functions. The search for the optimal SF-portfolio is similar to Roy's geometric method but the efficient frontier is different. In case of a finite number of scenarios, the SF-portfolio selection problem is reduced to a mixed linear Boolean programming problem.

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“…Similarly to (19), the probability constraint (23) can be replaced with a stronger one by using the upper-bound estimates for the probability P …”

Section: Minimizing the Monetary Reserve (Var) That Ensures The Satismentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Safety-first portfolio selection

Norkin

Boyko

2012

Cybern Syst Anal

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Methods for Matrix Games with Mixed Strategies and Quantile Payoff Function

Popov

2019

Mathematical Optimization Theory and Operations Research

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Delta hedging a multi‐fixed‐income‐securities portfolio under gamma and vega constraints

Ortíz

Stone

Zissu

2009

The Journal of Risk Finance

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Purpose -The purpose of this paper is to present an innovative model that helps create a portfolio of m-fixed-income securities, each with the optimal weight, in order for the portfolio to be d-and g-hedged against small changes in interest rates. Re-balancing a portfolio on a periodic basis is necessary, but also very costly. The model presented in this paper minimizes the necessity of rebalancing a portfolio, by choosing the optimal d-hedge ratios when constructing the initial portfolio to be hedged against interest rate risk. Design/methodology/approach -In this paper, a general model is developed to obtain the optimal d hedge for a portfolio of m-fixed-income-securities (a 1 , a 2 , a 3 ,. . .; a i , . . . , a m ), each, a function of the market interest rate y, such that when the value of each of the individual securities changes up or down, because of changes in market rates y, the total value of the portfolio is unchanged. The delta hedge is developed under the constraint of a zero-gamma, in order to avoid costs related to the re-balancing of such portfolio. Findings -An innovative model is developed that helps create a portfolio of m-fixed-income securities, each with the optimal weight, in order for the portfolio to be d-and g-hedged against small changes in interest rates. Practical implications -The model minimizes the necessity of rebalancing a portfolio, by choosing the optimal d-hedge ratios when constructing the initial portfolio to be hedged against interest rate risk. Originality/value -An innovative model has been developed that helps create a portfolio of m-fixed-income securities, each with the optimal weight, in order for the portfolio to be delta-and gamma-hedged against small changes in interest rates.

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Selection of a fixed-income portfolio

Cited by 3 publications

References 5 publications

Safety-first portfolio selection

Safety-first portfolio selection

Methods for Matrix Games with Mixed Strategies and Quantile Payoff Function

Delta hedging a multi‐fixed‐income‐securities portfolio under gamma and vega constraints

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