Immunization Using a Parametric Model of the Term Structure
Autor(a) principal: | |
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Data de Publicação: | 2005 |
Outros Autores: | |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10174/8422 |
Resumo: | In this paper, we develop a new immunization model based on a parametric specification of the term structure of interest rates. The model extends traditional duration analysis to account for both parallel and non-parallel term structure shifts that have an economic meaning. Contrary to most interest rate risk models, we analyse both first-order and second-order conditions for bond portfolio immunization and conclude that the key to successful protection will be to build up a bond portfolio such that the gradient of its future value is zero, and such that its Hessian matrix is positive semidefinite. In addition, we provide explicit formulae for new parametric interest rate risk measures and present alternative approaches to implement the immunization strategy. Furthermore, we provide useful expressions for the sensitivity of interest rate risk measures to changes in term structure shape parameters. |
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Immunization Using a Parametric Model of the Term StructureImmunizationdurationparametric modelinterest rate riskIn this paper, we develop a new immunization model based on a parametric specification of the term structure of interest rates. The model extends traditional duration analysis to account for both parallel and non-parallel term structure shifts that have an economic meaning. Contrary to most interest rate risk models, we analyse both first-order and second-order conditions for bond portfolio immunization and conclude that the key to successful protection will be to build up a bond portfolio such that the gradient of its future value is zero, and such that its Hessian matrix is positive semidefinite. In addition, we provide explicit formulae for new parametric interest rate risk measures and present alternative approaches to implement the immunization strategy. Furthermore, we provide useful expressions for the sensitivity of interest rate risk measures to changes in term structure shape parameters.2013-04-03T11:29:28Z2013-04-032005-01-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articlehttp://hdl.handle.net/10174/8422http://hdl.handle.net/10174/8422engBravo, J. e C.M.P.da Silva (2005), Immunization Using a Parametric Model of the Term Structure, Documento de Trabalho nº 2005/19, Universidade de Évora, Departamento de Economia.32jbravo@uevora.ptndE43, G1119_2005Department of Economics, University of ÉvoraISEG - School of Economics and Management, Technical University of LisbonBravo, Jorge Miguel VenturaSilva, Carlos Manuel Pereira dainfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2024-01-03T18:49:25Zoai:dspace.uevora.pt:10174/8422Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-20T01:02:40.730690Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Immunization Using a Parametric Model of the Term Structure |
title |
Immunization Using a Parametric Model of the Term Structure |
spellingShingle |
Immunization Using a Parametric Model of the Term Structure Bravo, Jorge Miguel Ventura Immunization duration parametric model interest rate risk |
title_short |
Immunization Using a Parametric Model of the Term Structure |
title_full |
Immunization Using a Parametric Model of the Term Structure |
title_fullStr |
Immunization Using a Parametric Model of the Term Structure |
title_full_unstemmed |
Immunization Using a Parametric Model of the Term Structure |
title_sort |
Immunization Using a Parametric Model of the Term Structure |
author |
Bravo, Jorge Miguel Ventura |
author_facet |
Bravo, Jorge Miguel Ventura Silva, Carlos Manuel Pereira da |
author_role |
author |
author2 |
Silva, Carlos Manuel Pereira da |
author2_role |
author |
dc.contributor.author.fl_str_mv |
Bravo, Jorge Miguel Ventura Silva, Carlos Manuel Pereira da |
dc.subject.por.fl_str_mv |
Immunization duration parametric model interest rate risk |
topic |
Immunization duration parametric model interest rate risk |
description |
In this paper, we develop a new immunization model based on a parametric specification of the term structure of interest rates. The model extends traditional duration analysis to account for both parallel and non-parallel term structure shifts that have an economic meaning. Contrary to most interest rate risk models, we analyse both first-order and second-order conditions for bond portfolio immunization and conclude that the key to successful protection will be to build up a bond portfolio such that the gradient of its future value is zero, and such that its Hessian matrix is positive semidefinite. In addition, we provide explicit formulae for new parametric interest rate risk measures and present alternative approaches to implement the immunization strategy. Furthermore, we provide useful expressions for the sensitivity of interest rate risk measures to changes in term structure shape parameters. |
publishDate |
2005 |
dc.date.none.fl_str_mv |
2005-01-01T00:00:00Z 2013-04-03T11:29:28Z 2013-04-03 |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10174/8422 http://hdl.handle.net/10174/8422 |
url |
http://hdl.handle.net/10174/8422 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
Bravo, J. e C.M.P.da Silva (2005), Immunization Using a Parametric Model of the Term Structure, Documento de Trabalho nº 2005/19, Universidade de Évora, Departamento de Economia. 32 jbravo@uevora.pt nd E43, G11 19_2005 Department of Economics, University of Évora ISEG - School of Economics and Management, Technical University of Lisbon |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
instname_str |
Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
instacron_str |
RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
collection |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
repository.name.fl_str_mv |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
repository.mail.fl_str_mv |
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1799136510643011584 |