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Bond portfolio optimization with long-range dependent credits.
- Source :
- Journal of Industrial & Management Optimization; Oct2023, Vol. 19 Issue 10, p1-15, 15p
- Publication Year :
- 2023
-
Abstract
- Consider the optimal allocation between money market account and corporate bond fund. While the money market account is free of credit risk, corporate bonds are defaultable and exhibit long-range dependence (LRD) in credit risk. We propose a Volterra default intensity model to capture the LRD in credit risk. Using utility maximization, we derive the novel optimal investment strategy for a corporate bond fund. As empirical study shows that the COVID-19 pandemic has lowered the level of LRD in credit risk, we conduct sensitivity analysis and empirically investigate the changes in demand for corporate bonds before and during the pandemic period. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 15475816
- Volume :
- 19
- Issue :
- 10
- Database :
- Complementary Index
- Journal :
- Journal of Industrial & Management Optimization
- Publication Type :
- Academic Journal
- Accession number :
- 163744366
- Full Text :
- https://doi.org/10.3934/jimo.2022253