  How should financial institutions hedge their balance sheets against interest
rate risk when they have long-term assets and liabilities? Using the
perspective of functional and numerical analysis, we propose a model-free bond
portfolio selection method that generalizes classical immunization and
accommodates arbitrary liability structure, portfolio constraints, and
perturbations in interest rates. We prove the generic existence of an
immunizing portfolio that maximizes the worst-case equity with a tight error
estimate and provide a solution algorithm. Numerical evaluations using
empirical and simulated yield curves from a no-arbitrage term structure model
support the feasibility and accuracy of our approach relative to existing
methods.
