In this paper, we discuss and examine the portfolio optimization problems in the Italian fixed income market considering two main sources of risk: prices risk and market risk. To achieve this aim, we propose a two-step optimization problem for two types of bonds. In particular, we manage the price risk implementing the classical immunization method and then, using the ex-post results from the optimal immunization problem, we are able to deal with market risk maximizing the portfolio wealth in a reward-risk framework. Adopting this approach, the paper then explores empirical applications on the Italian fixed income market using data for the period 2005-2015. Empirical results shows that the two-step optimization build efficient portfolios that minimize the price risk and the market risk. This ex-post analysis indicates the usefulness of the proposed methodology, maximizing the investor’s wealth and understanding the dynamics of the bonds.

(2016). Reward and Risk in the Italian Fixed Income Market . Retrieved from http://hdl.handle.net/10446/84264

Reward and Risk in the Italian Fixed Income Market

Kouaissah, Noureddine;Ortobelli Lozza, Sergio;
2016-01-01

Abstract

In this paper, we discuss and examine the portfolio optimization problems in the Italian fixed income market considering two main sources of risk: prices risk and market risk. To achieve this aim, we propose a two-step optimization problem for two types of bonds. In particular, we manage the price risk implementing the classical immunization method and then, using the ex-post results from the optimal immunization problem, we are able to deal with market risk maximizing the portfolio wealth in a reward-risk framework. Adopting this approach, the paper then explores empirical applications on the Italian fixed income market using data for the period 2005-2015. Empirical results shows that the two-step optimization build efficient portfolios that minimize the price risk and the market risk. This ex-post analysis indicates the usefulness of the proposed methodology, maximizing the investor’s wealth and understanding the dynamics of the bonds.
2016
Kouaissah, Noureddine; ORTOBELLI LOZZA, Sergio; Tichy, Tomas
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10446/84264
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