In Liability Driven Strategies, reading 19, one possibility is that the plan sponsor allows the manager some flexibility in selecting the hedging ratio. This flexibility in selecting the hedging ratio can be called strategic hedging. For example, the mandate could be to stay within a range of 25% to 75%.
When the manager anticipates lower market rates and gains on receive-fixed interest rate swaps, the manager prefers to be at the top of an allowable range - I did not understand this, why manager prefers to be at the top of an allowable range.
Can someone pls help.
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