Optimal Strategies for the Issuances of Public Debt Securities
Dr Massimo Bernaschi, Istituto Applicazioni del Calcolo ---- IAC-CNR , Rome, Italy

Abstract:
We describe a model for the optimization of the issuances of Public Debt securities developed for the Italian Ministry of Economy and Finance. The goal is to determine the composition of the portfolio issued every month which minimizes a specific cost function. Mathematically speaking, this is a stochastic optimal control problem with strong constraints imposed by national regulations and the Maastricht treaty. The main stochastic component of the problem is represented by the evolution of interest rates. We discuss the different optmization strategies we employ (from classic Linear Programming techniques to sophisticated Model Predictive Control strategies) and provide an estimate of the risk associated with any issuance policy.