Abstract
A financial world is considered where an agent invests in a set of assets and partially funds the investment through debt. The yield from each asset and the cost of each liability linearly depend on the same set of random factors. An investment-funding strategy which provides a surely non-negative yield is searched for. The problem reduces to the inversion (in a generalized sense) of a matrix. From the toolbox of one-sided inversion some theorems are shown to provide the desired strategy. The case of the Moore-Penrose generalized inverse is also considered. It is shown that an approximate immunization strategy can be designed through the use of linear programming.
Partially supported by M.U.R.S.T. and C.N.R.. The Authors are deeply indebted to Stavros Zenios, Sherren Hobson and to two anonymous referees for useful suggestions and remarks. The responsibility for remaining deficiencies or mistakes is, of course, totally that of the authors.
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© 1994 Physica-Verlag Heidelberg
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Beccacece, F., Peccati, L. (1994). Immunization Strategies in Linear Models. In: D’Ecclesia, R.L., Zenios, S.A. (eds) Operations Research Models in Quantitative Finance. Contributions to Management Science. Physica-Verlag HD. https://doi.org/10.1007/978-3-642-46957-2_4
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DOI: https://doi.org/10.1007/978-3-642-46957-2_4
Publisher Name: Physica-Verlag HD
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