Journal of Economic Dynamics and Control 22 (1998) 1517 — 1541 Dynamic models for fixed-income portfolio management under uncertainty Stavros A. Zenios*, Martin R. Holmer, Raymond McKendall, Christiana Vassiadou-Zeniou Department of Public and Business Administration, University of Cyprus, Kallipoleos 75, P.O. Box. 537, CY 1678, Nicosia, Cyprus Received 2 April 1996; accepted 28 November 1997 Abstract We develop multi-period dynamic models for fixed-income portfolio management under uncertainty, using multi-stage stochastic programming with recourse. The models integrate the prescriptive stochastic programs with descriptive Monte Carlo simulation models of the term structure of interest rates. Extensive validation experiments are carried out to establish the effectiveness of the models in hedging against uncertainty, and to assess their performance vis-a` -vis single- period models. An application to tracking the Salomon Brothers Mortgage Index is reported, with very encouraging results. Results that establish the efficacy of the models in hedging against out-of-sample scenarios are also reported for an application from money management. The multi-period models outperform classical models based on portfolio immunization and single-period models.  1998 Elsevier Science B.V. All rights reserved. JEL classification: G0 C6 D9 Keywords: Intertemporal portfolio theory; Stochastic programming; Monte Carlo simulations 1. Introduction Portfolio management problems can be viewed as multi-period dynamic decision problems where transactions take place at discrete points in time. * Corresponding author. E-mail: zenios@wharton.upenn.edu  HR&A, Washington, DC.  The Wharton School, University of Pennsylvania, PA.  Bank of Cyprus, Nicosia, Cyprus. 0165-1889/98/$ — see front matter  1998 Elsevier Science B.V. All rights reserved. PII S0165-1889(97)00115-2