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(Created page with "Which of the following statements regarding immunization are true? <ul style="list-style-type:upper-roman"> <li>If long-term interest rates are lower than short-term rates, the need for immunization is reduced.</li> <li>Either Macaulay or modified duration can be used to develop an immunization strategy.</li> <li>Both processes of matching the present values of the flows or the flows themselves will produce exact matching.</li> </ul> <ul class="mw-excansopts"><li>I onl...") |
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Determine which of the following statements regarding asset-liability management techniques is true. | |||
<ul | <ul class="mw-excansopts"><li>Redington immunization requires that the convexity of the liabilities is greater than the | ||
<li> | convexity of the assets.</li><li>An advantage of the Redington immunization technique over the cash-flow matching | ||
technique is that the portfolio manager has more investment choices available.</li><li>Both Redington immunization and full immunization are based on the assumption that | |||
<li> | the yield curve has higher yields for longer term investments.</li><li>A fully immunized portfolio ensures that the present value of assets will exceed the | ||
<li>Both | present value of liabilities with non-parallel shifts in the yield curve.</li><li>A cash-flow matched portfolio requires less rebalancing than a Redington immunized | ||
< | portfolio, but more rebalancing than a fully immunized portfolio.</li></ul> | ||
{{soacopyright | 2023 }} | {{soacopyright | 2023 }} | ||
Latest revision as of 19:33, 20 November 2023
Determine which of the following statements regarding asset-liability management techniques is true.
- Redington immunization requires that the convexity of the liabilities is greater than the convexity of the assets.
- An advantage of the Redington immunization technique over the cash-flow matching technique is that the portfolio manager has more investment choices available.
- Both Redington immunization and full immunization are based on the assumption that the yield curve has higher yields for longer term investments.
- A fully immunized portfolio ensures that the present value of assets will exceed the present value of liabilities with non-parallel shifts in the yield curve.
- A cash-flow matched portfolio requires less rebalancing than a Redington immunized portfolio, but more rebalancing than a fully immunized portfolio.
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.