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2008 | nr 18 | 165--181
Tytuł artykułu

Are Immunization Strategies Effective? An Empirical Study Based on Quotations from MTS Poland Market

Warianty tytułu
Języki publikacji
EN
Abstrakty
EN
This paper presents results of an empirical study designed to test effectiveness of immunization strategies for a portfolio of default-free fixed-income bonds, where immunization strategy consists in selecting a portfolio for which the exposure of its terminal value to arbitrary interest rate changes is minimized. Two immunization strategies were tested: M2 minimization strategy - based on the second order duration, and M1 minimization strategy - based on the absolute value duration. Immunization strategies were applied to RP Treasury fixed-coupon bonds traded on the MTS Poland Market. Upon deriving the empirical term structure of interest rates, three types of portfolio have been constructed for 25 different investment horizons: one for each immunization strategy, while portfolios of the third type were composed of two bonds selected quasi-randomly. Next, relative changes in the terminal value. of all portfolios have' been calculated on three dates: one day after, one week after, and four weeks after portfolios were constructed. The two immunization strategies have performed equally well in terms of the relative decrease in the end-of-horizon value of portfolio, and much better than the quasi-random portfolios. Results, therefore, do not support claims of superiority of the M1 strategy over the A/2 strategy, reported by some researchers. (original abstract)
Rocznik
Numer
Strony
165--181
Opis fizyczny
Twórcy
  • Szkoła Główna Handlowa w Warszawie
Bibliografia
  • Bierwag G.O. (1977), Immunization, Duration and the. Term Structure of Interest Rates, Journal of Financial and Quantitative Analysis, December 1977.
  • Fabozzi F. J., G. Fong (2000), Zarządzanie portfelem inwestycji finansowych przynoszących stały dochód. PWN, Warszawa 2000.
  • Fisher L., R. L. Weil (1971), Coping with the Risk of Interest-Rate Fluctuations: Returns to Bondholders from Naive and Optimal Strategies, Journal of Business, October 1971.
  • Fong G., O. A. Vasicek (1984), A Risk Minimizing Strategy for Portfolio Immunization, Journal of Finance, Vol. 39, 1984.
  • Ingersoll J. E. Jr., J. Skelton, R. L. Weil (1978), Duration Forty Years Later. Journal of Financial and Quantitative Analysis, November 1978.
  • Khang C. (1979), Bond Immunization when Short Rates Fluctuate More than Long Rates. Journal of Financial and Quantitative Analysis, Vol. 14 (5), December 1979.
  • Klimkowska J. (2007), Immunization Conditions and Immunization Risk for a Fixed-Income Portfolio. Paper presented at the FindEcon 2007 Conference, Łódź (to appear in print).
  • Navalkha S., D. R. Chambers (1996), An Improved Immunization Strategy - M- Absolute. Financial Analysts Journal, September/October 1996.
Typ dokumentu
Bibliografia
Identyfikatory
Identyfikator YADDA
bwmeta1.element.ekon-element-000171217363

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