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dc.contributor.authorDate, Paresh
dc.date.accessioned2016-09-26T11:58:33Z
dc.date.available2016-09-26T11:58:33Z
dc.date.copyright2016-09-02
dc.date.issued2016-09-02
dc.identifier.urihttp://hdl.handle.net/11718/18593
dc.descriptionThe R & P seminar held at Wing 11 Committee Room, IIM Ahmedabad on September 02, 2016 by Dr. Paresh Date, Department of Mathematics, Brunel University on "A mixed integer linear programming model for optimal sovereign debt issuance".en_US
dc.description.abstractGovernments borrow funds to finance the excess of cash payments or interest payments over receipts, usually by issuing fixed income debt and index-linked debt. The goal of this work is to propose a stochastic optimization-based approach to determine the composition of the portfolio issued over a series of government auctions for the fixed income debt, to minimize the cost of servicing debt while controlling risk and maintaining market liquidity. We show that this debt issuance problem can be modelled as a mixed integer linear programming problem. The stochastic model for the interest rates is calibrated using a Kalman filter and the possible future yield curves are represented using a recombining trinomial lattice. The use of a latent factor interest rate model and a recombining lattice provides us with a realistic, yet very tractable scenario generator and allows us to do a multi-stage stochastic optimization involving binary variables on an ordinary desktop in a matter of seconds. This, in turn, facilitates frequent re-calibration of the interest rate model and re-optimization of the issuance throughout the budgetary year allows us to respond to the changes in the interest rate environment. We successfully demonstrate the utility of our approach by out-of-sample back-testing on the UK debt issuance data.en_US
dc.language.isoenen_US
dc.publisherIndian Institute of Management, Ahmedabaden_US
dc.subjectlinear programmingen_US
dc.subjectprogramming modelen_US
dc.subjectdebt issuanceen_US
dc.subjectoptimal sovereignen_US
dc.titleA mixed integer linear programming model for optimal sovereign debt issuanceen_US
dc.typeVideoen_US


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