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Stability Properties of a Bond Portfolio Management Problem

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Abstract

The bond portfolio management problem is formulated as a multiperiod two-stage or multistage stochastic program based on interest rate scenarios. These scenarios depend on the available market data, on the applied estimation and sampling techniques, etc., and are used to evaluate coefficients of the resulting large scale mathematical program. The aim of the contribution is to analyze stability and sensitivity of this program on small changes of the coefficients – the (scenario dependent) values of future interest rates and prices. We shall prove that under sensible assumptions, the scenario subproblems are stable linear programs and that also the optimal first-stage decisions and the optimal value of the considered stochastic program possess acceptable continuity properties.

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Authors and Affiliations

  1. Department of Probability and Mathematical Statistics, Charles University, Sokolovská 83, CZ-186 75, Prague 8, Czech Republic

    Jitka Dupačová

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  1. Jitka Dupačová
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Dupačová, J. Stability Properties of a Bond Portfolio Management Problem. Annals of Operations Research 99, 251–265 (2000). https://doi.org/10.1023/A:1019275817688

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