On hedging the risk of default caused by changes of interest rates (Q2739835)
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scientific article; zbMATH DE number 1646312
| Language | Label | Description | Also known as |
|---|---|---|---|
| English | On hedging the risk of default caused by changes of interest rates |
scientific article; zbMATH DE number 1646312 |
Statements
16 September 2001
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portfolio of bonds
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changing interest rates
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risk
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financial mathematics
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On hedging the risk of default caused by changes of interest rates (English)
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The author considers a portfolio of \(m\) bonds and discuss the question how to eliminate the portfolio risk connected with possible changes of interest rates. An algorithm is proposed which calculates the proportions of bonds in the portfolio basing on durations of bonds. The author claims that this algorithm provides the portfolio for which the risk is absent and any change of the interest rates leads to gains. It seems too optimistic.
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