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Resource type: article, chapter

Solution of immunization problem in case of proportional spot rate shifts (RB-1995-37-04)

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Title Solution of immunization problem in case of proportional spot rate shifts (RB-1995-37-04)
Persons Authors: Leszek Saturnin Zaremba
Partner: Systems Research Institute Polish Academy of Sciences, Warsaw
Description In this paper we solve the immunization problem for bonds and treasury bills, which will here both be called bonds for simplicity. We give an answer to immunization problem not for the simplest case, when YTM is flat and unknown shifts are constant during investment time, but in a more general setting, where spot rates are arbitrary and their unknown shifts are proportional to spot rates values plus 1. We show that any bond portfolio Z that dominates a real or imaginary zero-coupon bond O maturing k years from now with the only one payment and such that the price of Z is not smaller than that of O solves the immunization problem and vice versa. We also demonstrate that the bonds and bond portfolios that dominate O are exactly those which durations are equal to k. As a result we give a formula for the unanticipated rate of return on any bond Z dominating the bond O being a result of proportional shifts in spot rates. (English)
Keywords "portfel obligacji"@pl, "spot rate shifts"@en, "immunization problem"@en, "zmiany kursu spot"@pl, "problem immunizacji"@pl, "bond portfolio"@en
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-1995-37-04
Place of publication: Warszawa
Publisher: IBSPAN
Time of publication: 1995
From page: 1
To page: 19
Resource language: English
License CC BY-SA 4.0
Technical information Submitter: Anna Wasilewska
Availability date: 13-01-2023
Collections Kolekcja Instytutu Badań Systemowych PAN w Warszawie

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Leszek Saturnin Zaremba. Solution of immunization problem in case of proportional spot rate shifts (RB-1995-37-04). [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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