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The effect of taxation on the pricing of government securities

Published online by Cambridge University Press:  20 April 2012

A. P. Leung
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Extract

0.1. Since the concept of immunization was introduced in Redington (1952) many new ideas have been advanced in connexion with the pricing of government securities. It is shown in Bierwag (1977) for example, that the applicability of an immunization strategy depends on the form of movements assumed possible in the yield curve.

0.2. Much of this earlier work has been framed in deterministic terms, where prices or yields are assumed to be known in advance, and uncertainty has been introduced via arbitrary instantaneous changes in those yields. It is easily shown that portfolios of securities with a given mean term or duration are immune (in the sense of yielding the same return at the required realization date) to certain forms of instantaneous change.

Type
Research Article
Information
Journal of the Institute of Actuaries , Volume 111 , Issue 3 , December 1984 , pp. 519 - 554
Copyright
Copyright © Institute and Faculty of Actuaries 1984

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