Revision as of 18:27, 20 November 2023 by Admin (Created page with "Determine which of the following statements regarding the Redington immunization technique is false. <ul class="mw-excansopts"><li>This technique assumes that the yield curve is flat.</li><li>This technique assumes that only parallel shifts in the yield curve are allowed.</li><li>This technique is designed to work only for small changes in the interest rate.</li><li>The modified duration of the assets must equal the modified duration of the liabilities.</li><li>The conv...")
Nov 20'23
Exercise
Determine which of the following statements regarding the Redington immunization technique is false.
- This technique assumes that the yield curve is flat.
- This technique assumes that only parallel shifts in the yield curve are allowed.
- This technique is designed to work only for small changes in the interest rate.
- The modified duration of the assets must equal the modified duration of the liabilities.
- The convexity of the assets must equal the convexity of the liabilities.
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
Nov 20'23
Solution: E
Answer E is false because the convexity of the assets must be greater than the convexity of the liabilities.
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.