scholarly journals Estratégias de Imunização de Carteiras de Renda Fixa no Brasil

2018 ◽  
Vol 16 (2) ◽  
pp. 179
Author(s):  
Sofia Kusiak Meirelles ◽  
Marcelo Fernandes
Keyword(s):  
Yield Curve ◽  
Factor Model ◽  
Polynomial Model ◽  
Alternative Strategy ◽  
Fixed Income ◽  
Hedging Strategy ◽  
Hedging Strategies ◽  
Hedging Portfolio ◽  
Alternative Methodology ◽  
Fixed Income Portfolio

This paper aims to statistically compare the performance of two hedging strategies for Brazilian fixed income portfolios, with discrete rebalancing. The first hedging strategy matches duration, and hence it considers only small parallel changes in the yield curve. The alternative methodology ponders level, curvature and convexity shifts through a factor model. We first estimate the yield curve using the polynomial model of Nelson & Siegel (1987) and Diebold & Li (2006) and then immunize the fixed income portfolio using Litterman & Scheinkman’s (1991) hedging procedure. The alternative strategy for portfolio immunization outperforms duration matching in the empirical exercise we contemplate. Additionally, we show that rebalancing the hedging portfolio every month is more efficient than at other frequencies.

scholarly journals Hedging Long-Term Liabilities*

2020 ◽  
Author(s):  
Rogier Quaedvlieg ◽  
Peter Schotman
Keyword(s):  
Yield Curve ◽  
Mean Squared Error ◽  
Factor Model ◽  
Interest Rate Risk ◽  
Time Varying ◽  
Hedging Strategy ◽  
Factor Loadings ◽  
Life Insurers ◽  
Five Factors

Abstract Pension funds and life insurers face interest rate risk arising from the duration mismatch of their assets and liabilities. With the aim of hedging long-term liabilities, we estimate variations of a Nelson–Siegel model using swap returns with maturities up to 50 years. We consider versions with three and five factors, as well as constant and time-varying factor loadings. We find that we need either five factors or time-varying factor loadings in the three-factor model to accommodate the long end of the yield curve. The resulting factor hedge portfolios perform poorly due to strong multicollinearity of the factor loadings in the long end, and are easily beaten by a robust, near Mean-Squared-Error- optimal, hedging strategy that concentrates its weight on the longest available liquid bond.

scholarly journals Semi-static variance-optimal hedging in stochastic volatility models with Fourier representation

2019 ◽  
Vol 56 (3) ◽  
pp. 787-809 ◽  
Author(s):  
Paolo Di Tella ◽  
Martin Haubold ◽  
Martin Keller-Ressel
Keyword(s):  
Factor Model ◽  
Heston Model ◽  
Market Model ◽  
Stochastic Volatility Models ◽  
Hedging Strategy ◽  
Static Hedging ◽  
Hedging Strategies ◽  
Optimal Hedging ◽  
Volatility Models ◽  
Set Up

AbstractWe introduce variance-optimal semi-static hedging strategies for a given contingent claim. To obtain a tractable formula for the expected squared hedging error and the optimal hedging strategy we use a Fourier approach in a multidimensional factor model. We apply the theory to set up a variance-optimal semi-static hedging strategy for a variance swap in the Heston model, which is affine, in the 3/2 model, which is not, and in a market model including jumps.

An Affine Macro-Factor Model of the UK Yield Curve

2007 ◽  
Author(s):  
Peter M. Lildholdt ◽  
Nikolaos Panigirtzoglou ◽  
Chris Peacock
Keyword(s):  
Yield Curve ◽  
Factor Model ◽  
The Uk

Hedging of Variable Annuities under Basis Risk

2020 ◽  
Vol 14 (2) ◽  
Author(s):  
Jan Bauer
Keyword(s):  
Financial Market ◽  
Negative Impact ◽  
Mathematical Finance ◽  
Insurance Company ◽  
Hedging Strategy ◽  
Variable Annuities ◽  
Basis Risk ◽  
Hedging Strategies ◽  
Cross Hedging ◽  
Geometric Brownian Motions

AbstractI study dynamic hedging for variable annuities under basis risk. Basis risk, which arises from the imperfect correlation between the underlying fund and the proxy asset used for hedging, has a highly negative impact on the hedging performance. In this paper, I model the financial market based on correlated geometric Brownian motions and analyze the risk management for a pool of stylized GMAB contracts. I investigate whether the choice of a suitable hedging strategy can help to reduce the risk for the insurance company. Comparing several cross-hedging strategies, I observe very similar hedging performances. Particularly, I find that well-established but complex strategies from mathematical finance do not outperform simple and naive approaches in the context studied. Diversification, however, could help to reduce the adverse impact of basis risk.

Dynamic models for fixed-income portfolio management under uncertainty

1998 ◽  
Vol 22 (10) ◽  
pp. 1517-1541 ◽  
Author(s):  
Stavros A Zenios ◽  
Martin R Holmer ◽  
Raymond McKendall ◽  
Christiana Vassiadou-Zeniou
Keyword(s):  
Portfolio Management ◽  
Dynamic Models ◽  
Fixed Income ◽  
Fixed Income Portfolio
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