Portfolio Design and the Goal of Immunization
26 Pages Posted: 14 May 2007
Date Written: June 2003
In this paper, we analyze the influence of portfolio design on the goal of immunization in Spanish bond portfolios. Extending the work of Fooladi and Roberts (1992) and Bierwag et al. (1993), we test a wide set of strategies which includes duration-matching strategies and strategies based on the M-squared of Fong and Vasicek (1984) and the M-absolute of Nawalkha and Chambers (1996). We attempt to evaluate the effectiveness of these dispersion measures and justify the improvements in immunization when portfolios include a bond maturing near the horizon date.
Keywords: immunization, duration, interest rate, risk management, fixed income
JEL Classification: E43, G11
Suggested Citation: Suggested Citation