The 2008 credit crisis has deeply affected the price of corporate liabilities in both equity and fixed income secondary markets leading to unprecedented portfolio losses by financial investors. A coordinated intervention by monetary institutions limited the systemic consequences of the crisis, without, however, avoiding a significant fall of corporate bond prices across international markets. In this article, we analyse alternative portfolio optimization approaches in the fixed income market over the 2008–2009 period, a time in which credit derivative markets became very illiquid. All policies are analysed relying on a unique set of market and credit scenarios generated by common and idiosyncratic risk factors on an extended investment universe. The crisis provides an interesting test period to analyse in particular the potential of dynamic versus static portfolio selection approaches. We also consider dynamic portfolio strategies based on multistage stochastic programming versus policy rule-based methods and analyse their relative performance against a corporate bond index widely adopted in practice as a market benchmark.

Scenario-based dynamic corporate bond portfolio management

CONSIGLI, Giorgio;IAQUINTA, Gaetano;
2012-01-01

Abstract

The 2008 credit crisis has deeply affected the price of corporate liabilities in both equity and fixed income secondary markets leading to unprecedented portfolio losses by financial investors. A coordinated intervention by monetary institutions limited the systemic consequences of the crisis, without, however, avoiding a significant fall of corporate bond prices across international markets. In this article, we analyse alternative portfolio optimization approaches in the fixed income market over the 2008–2009 period, a time in which credit derivative markets became very illiquid. All policies are analysed relying on a unique set of market and credit scenarios generated by common and idiosyncratic risk factors on an extended investment universe. The crisis provides an interesting test period to analyse in particular the potential of dynamic versus static portfolio selection approaches. We also consider dynamic portfolio strategies based on multistage stochastic programming versus policy rule-based methods and analyse their relative performance against a corporate bond index widely adopted in practice as a market benchmark.
journal article - articolo
2012
Beraldi, Patrizia; Consigli, Giorgio; De Simone, Francesco; Iaquinta, Gaetano; Violi, Antonio
File allegato/i alla scheda:
File Dimensione del file Formato  
IMA J Management Math-2012-Beraldi-imaman_dps017.pdf

Solo gestori di archivio

Versione: publisher's version - versione editoriale
Licenza: Licenza default Aisberg
Dimensione del file 1.35 MB
Formato Adobe PDF
1.35 MB Adobe PDF   Visualizza/Apri
Pubblicazioni consigliate

Aisberg ©2008 Servizi bibliotecari, Università degli studi di Bergamo | Terms of use/Condizioni di utilizzo

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10446/28086
Citazioni
  • Scopus 6
  • ???jsp.display-item.citation.isi??? 4
social impact