A Theory of Bond Portfolios
نویسندگان
چکیده
We introduce a bond portfolio management theory based on foundations similar to that of stock portfolio management. A general continuous time zero coupon market is considered. The problem of optimal portfolios of zero coupon bonds is solved for general utility functions, under a condition of no-arbitrage in the zero coupon market. A mutual fund theorem is proved, in the case of deterministic volatilities. Explicit expressions are given for the optimal solutions for several utility functions.
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