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Paper / 2026SMQ / 79261945887445
Multiperiod bond portfolio optimization with transaction costs using a Markov Decision process
Balaji Ramachandran / Shashi Jain / Srikanth Iyer
fixed income / interest ratesResource overview

Multiperiod bond portfolio optimization with transaction costs using a Markov Decision process

Paper2026

by Balaji Ramachandran, Shashi Jain, Srikanth Iyer

Tags
fixed incomeinterest ratesoptimizationportfolio managementportfolio optimizationterm structure modelstransaction costs

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Suggested foundations for portfolio construction and rates and fixed income. Specialist prerequisites vary by paper.

Before you read

  1. Eigenvalues and Covariance Matrices

    Understand the covariance structure of portfolio risk.

  2. Constrained and Convex Optimisation

    Read objectives, constraints and optimality conditions.

  3. The Bank Account, Short Rate, and the Fundamental Pricing Equation

    Understand discounting in a stochastic-rate model.

  4. DV01, Dollar Duration, and One-Factor Price Sensitivity

    Translate yield movements into first-order price risk.

Go further

  1. Mean-Variance Optimisation

    Construct allocations and examine sensitivity to estimated inputs.

  2. Portfolio Constraints

    Turn mathematical weights into feasible portfolio decisions.

  3. Bootstrapping the Spot Curve from Market Instruments

    Build a consistent discount curve.

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