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Sequential arbitrage measurements and interest rate envelopes

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dc.affiliation.dptoUC3M. Departamento de Economía de la Empresaes
dc.contributor.authorBalbás, Alejandro
dc.contributor.authorLópez, Susana
dc.date.accessioned2012-04-10T16:51:18Z
dc.date.available2012-04-10T16:51:18Z
dc.date.issued2008-09
dc.description.abstractThis paper proposes new measures that provide us with the level of sequential arbitrage in bond markets. All the measures vanish in an arbitrage-free market and all of them are positive otherwise. Each measure is generated by a dual pair of optimization problems. Primal problems permit us to compute optimal sequential arbitrage strategies, if available. Each dual problem generates a concrete proxy for the term structure of interest rates. The set of proxies allows us to obtain the exact market price of any bond and may measure several effects. For instance, the credit risk spread of nondefault free bonds, or the embedded option price of callable or extendible bonds. The developed theory has been tested empirically.
dc.description.sponsorshipResearch partially supported by Welzia Management SGIIC, RD_Sistemas, Comunidad Autónoma de Madrid (Spain), Grant s-0505/tic/000230, and MEyC (Spain), Grant SEJ2006-15401-C04-03
dc.description.statusPublicado
dc.format.mimetypeapplication/pdf
dc.identifier.bibliographicCitationJournal of Optimization Theory and Applications, 2008, v.138, nº 3, pp. 361-374
dc.identifier.doi10.1007/s10957-008-9391-5
dc.identifier.issn0022-3239
dc.identifier.publicationfirstpage361
dc.identifier.publicationissue3
dc.identifier.publicationlastpage374
dc.identifier.publicationtitleJournal of Optimization Theory and Applications
dc.identifier.publicationvolume138
dc.identifier.urihttps://hdl.handle.net/10016/14001
dc.language.isoeng
dc.publisherSpringer
dc.relation.publisherversionhttp://dx.doi.org/10.1007/s10957-008-9391-5
dc.rights.accessRightsopen access
dc.subject.ecienciaEmpresa
dc.subject.otherPortfolio optimization
dc.subject.otherSequential arbitrage measurements
dc.subject.otherTerm structure of interest rates
dc.subject.otherEmbedded option premiums
dc.titleSequential arbitrage measurements and interest rate envelopes
dc.typeresearch article*
dc.type.hasVersionAM*
dspace.entity.typePublication
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