Bond Portfolio Immunization: Tests of Maturity, One‐ and Two‐factor Duration Matching Strategies

Bierwag, G. O.; Kaufman, George G.; Latta, Cynthia M.

doi:10.1111/j.1540-6288.1987.tb00761.x

Cited by 34 publications

(13 citation statements)

References 5 publications

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“…so that β t , the factor of proportionality, is clearly a function of the stochastic process, g ( s, t ). It may be noted that β, is independent of s. If this were not so, there could exist opportunities for profitable arbitrage (Bierwag (1987b)). …”

Section: The Modelmentioning

confidence: 99%

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Single‐factor Duration Models: Canadian Tests

Bierwag

Roberts

1990

J of Financial Research

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Single-factor duration models of bond returns are derived from an underlying stochastic process of the term structure of interest rates. It is shown that beta in these models is a function of the parameters of the stochastic process and of implied measures of duration. Using unsmoothed Canadian monthly prices on default-free government bonds, the single-factor duration model is found to perform well from 1963 to 1986, but the hypothesis of stationarity of the duration-based bond returns model for the period cannot be accepted. Some of the underlying stochastic processes imply stationary models and some of them imply nonstationary bond return models. The models of this paper open the door to a variety of linear bond return models having a strong theoretical support based on a theory of the stochastic motion of the term structure.

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Section: The Modelmentioning

confidence: 99%

“…Bierwag (1987a, Ch. 12) contains a survey of the empirical and theoretical literature on duration‐based, bond‐return models.…”

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confidence: 99%

Single‐factor Duration Models: Canadian Tests

Bierwag

Roberts

1990

J of Financial Research

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“…The current generation of models incorporates the term structure so that it is no longer the case that duration users must assume a flat term structure. Bierwag, Kaufman, and Toevs (1983b), Brennan and Schwartz (1983), Bierwag, Kaufman, and Latta (1987), and Bierwag, Fooladi, and Roberts (1993) are a few examples.…”

Section: Managerial Finance 24mentioning

confidence: 99%

Risk management with duration analysis

Fooladi

Roberts

2000

Managerial Finance

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If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractThis paper surveys current applications of duration analysis in risk management.Using straightforward examples, it shows how duration works and demonstrates its central role in assessment and hedging of interest rate risk.

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“…However, the impact of interest rate changes over a few weeks is normally well-approximated by duration. Bierwag et al (1987) and Hodges and Parekh (2006) show that the usefulness of convexity is generally not related to better approximating the price-yield relationship, but rather to the fact that hedging strategies relying on duration-and convexity-matching are consistent with plausible two-factor processes describing non-parallel yield curve shifts.…”

Section: Introductionmentioning

confidence: 96%