Artikel

Risk management of interest rate derivative portfolios: A stochastic control approach

In this paper we formulate the Risk Management Control problem in the interest rate area as a constrained stochastic portfolio optimization problem. The utility that we use can be any continuous function and based on the viscosity theory, the unique solution of the problem is guaranteed. The numerical approximation scheme is presented and applied using a single factor interest rate model. It is shown how the whole methodology works in practice, with the implementation of the algorithm for a specific interest rate portfolio. The recent financial crisis showed that risk management of derivatives portfolios especially in the interest rate market is crucial for the stability of the financial system. Modern Value at Risk (VAR) and Conditional Value at Risk (CVAR) techniques, although very useful and easy to understand, fail to grasp the need for on-line controlling and monitoring of derivatives portfolio. The portfolios should be designed in a way that risk and return be quantified and controlled in every possible state of the world. We hope that this methodology contributes towards this direction.

Sprache
Englisch

Erschienen in
Journal: Journal of Risk and Financial Management ; ISSN: 1911-8074 ; Volume: 7 ; Year: 2014 ; Issue: 4 ; Pages: 130-149 ; Basel: MDPI

Klassifikation
Wirtschaft
Portfolio Choice; Investment Decisions
Asset Pricing; Trading Volume; Bond Interest Rates
Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Optimization Techniques; Programming Models; Dynamic Analysis
Thema
stochastic portfolio optimization
stochastic control
interest rate derivatives
sensitivity constraints

Ereignis
Geistige Schöpfung
(wer)
Kiriakopoulos, Konstantinos
Koulis, Alexandros
Ereignis
Veröffentlichung
(wer)
MDPI
(wo)
Basel
(wann)
2014

DOI
doi:10.3390/jrfm7040130
Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Artikel

Beteiligte

  • Kiriakopoulos, Konstantinos
  • Koulis, Alexandros
  • MDPI

Entstanden

  • 2014

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