Optimal Issuance Strategy of National Debt Base on Balance Management

China will carry balance management of national debt into execution in 2006, which certainly will influence the optimal issuance strategy of national debt. The main objective of debt manager is to find optimal issuance strategy of national debt in order to minimize the expected interest cost of portfolio of national debt. Based on this assumption, a stochastic optimization model was proposed, in which the term structure of interest rate follows Vasicek model. The stochastic optimization model could be translated into a linear programming model using the Monte Carlo simulation for interest rate. At last, an empirical research was done. The research compared the different optimal issuance strategies under the deficit management and the balance management. The results indicate that the Ministry of Finance should increase the issuance amount of short-term national debt and restrict that of long-term national debt under the balance management