In this paper, we initiate a research on optimal bond portfolios, that are held to their maturity. We solve the problem analytically for log utility investor in the case of one risky corporate asset. We compare the behavior of these portfolios to equally weighted and portfolios with randomly selected weights. We apply simulation based on Vasicek’s copula approach to derive optimal weights for a corresponding problem involving more than one corporate bond. Further we discover that these portfolios outperform naive investment in constant maturity (CCM) bond indices with a similar maturity horizon. We explain possible application of our findings to boost asset liability management (ALM) strategies for pensions and insurance companies.
CARMEL racio analiys in the asset liability management process for insurance companies in Republic of Serbia