Validating Term Structure Models for Bond Portfolio Immunization

Student: Beshenov Sergey

Supervisor: Victor A Lapshin

Educational Programme: Financial Markets and Financial Institutions (Master)

Final Grade: 8

Year of Graduation: 2017

In this paper we examined a number of term structure models for parametric interest risk immunization. The study was conducted using data on russian bond market. The bond quotes from April 2012 to April 2017 were used for this purpose. The quality of the immunization was determined based on risk-metrics such as VaR, ES, MAE, RMSE. In case of daily rebalancing of immunizing portfolio none of term structure models occurred to be better than the immunization using modified duration technique. Nelson-Siegel, Svensson and Cox-Ingorsoll-Ross models performed better than other methods and strategies in case of weekly rebalancing.

Full text (added May 15, 2017)

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