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.

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.