Tid: 11 oktober 2010 kl 15.15-17.00.

Plats : Seminarierummet 3733, Institutionen för matematik, KTH, Lindstedts väg 25. (observera dagen och lokalen), Karta!

Föredragshållare: Jörgen Blomvall, Linköpings universitet

Titel: Interest rate modeling and optimal investments

Abstract

To determine optimal investment decisions in interest rate markets requires careful modeling of market movements as well as the term premium. Contracts on the fixed income market are traded OTC, since these prices are only indicative and are published at different time points, this creates a lot of noise in the input data which creates unrealistic yield curves. The starting point will be the presentation of a new, optimization based, yield curve estimation method which can deal with these problems. When investment decisions are made, the most important parameters are the expected returns of the investments. To model the term premium on interest rate markets the model by Duffee (2002) is currently being used. When the model is being used on FED data (1962 - 2010), it makes reasonable estimations of the term premium. The Stochastic Programming applications which have been studied so far are investments in American government bonds and hedging of a company's exchange rate risk. Results from these applications are presented and possible future applications will be discussed.

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