Affine Term Structure Models: Applications in Portfolio Optimization and Change Point Detection

Affine term structure models are widely used for studying the relationship between yields on assets of different maturities. However, it can be a helpful tool construction fixed-income portfolios. The monitoring these bond portfolios is great importance investor. purpose this work twofold. Firstly, we construct and optimize using Markowitz’s portfolio approach to multifactor Gaussian affine model (ATSM) under no-arbitrage conditions estimated with minimum chi square estimation method. based compared some benchmark strategies, our findings show that proposed performs well risk–return tradeoff. Secondly, propose control chart procedures optimal weights government in order detect possible changes. results indicate useful detection changes asset allocation fixed income