CONTROL OF THE INTEREST RATE RISK IN A BOND PORTFOLIO AND GOAL PROGRAMMING
- People & Global Business Association
- Global Business and Finance Review
- Vol.3 No.1
-
1998.0635 - 48 (13 pages)
- 10
The interest rate risk of a bond investment is divided into the price and reinvestment risks. It has shown that reduction of one risk can be achieved only by increasing the other risk by the same amount. Therefore, control of the interest rate risk should be dealt with constructing a bond portfolio with a desirable combination of the two risks depending on expectation on future interest rates and also subject to various investment goals and constraints. This paper provides a prototype goal programming model which can be extended to control the interest rate risk of a broad range of financial assets.
Abstract
INTRODUCTION
RELATIONSHIP BETWEEN THE PRICE AND REINVESTMENT RISKS
THE GOAL PROGRAMMING MODEL
THE EXAMPLE
SUMMARY AND CONCLUSION
REFERENCES
BIOGRAPHY
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