Liability driven investing
I have a very basic question. Liability driven investing. If for instance, a corporate has raised $100 (for simplicity) at 6% for a year, it needs to pay back $106 after a year no matter what the prevailing rates are then. So if the liability (amt) is fixed, how would the term structure affect it? (Yes u may report the market value of debt on balance sheet, but that wouldn’t change the amount owed (106)). And do why would one have to bother about immunization, if the fluctuations are going to be just notional gains/losses?
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