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Studies on a general stock-bond integrated portfolio optimization model

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Abstract

The purpose of this paper is to extend a stock-bond integrated portfolio optimization model proposed by one of the authors in 1997 to the case where the universe covers risky (corporate) bonds in addition to stocks and risk-free (government) bonds. An integrated approach has been applied to Japanese market and was proved to generate a portfolio which usually outperforms standard asset allocation strategy. Inclusion of risky bonds is expected to lead to an even better portfolio. To properly handle risky bonds, we introduce a new scheme to quantify the risk associated risky bonds. We will demonstrate that the scheme proposed in this paper works very well, at least in the Japanese market.

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Authors and Affiliations

  1. Department of Industrial and Systems Engineering, Chuo University, Tokyo, Japan

    Koji Kato & Hiroshi Konno

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  1. Koji Kato
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  2. Hiroshi Konno
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Correspondence to Hiroshi Konno.

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Kato, K., Konno, H. Studies on a general stock-bond integrated portfolio optimization model. CMS 4, 41–57 (2007). https://doi.org/10.1007/s10287-006-0017-9

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  • DOI: https://doi.org/10.1007/s10287-006-0017-9

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