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Nov 20'23
Exercise
Determine which of the following statements is false with respect to Redington immunization
- Modified duration may change at different rates for each of the assets and liabilities a time goes by.
- Redington immunization requires infrequent rebalancing to keep modified duration ofassets equal to modified duration of liabilities.
- This technique is designed to work only for small changes in the interest rate.
- The yield curve is assumed to be flat.
- The yield curve shifts in parallel when the interest rate changes.
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
Nov 20'23
Solution: B
All are true except B. Immunization requires frequent rebalancing.
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.