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Contingent Immunization

Hey,

In FI mandates, I understand that Contingent Immunization(CI) assume that the ptf is actively managed as long as there is a surplus.

I read a set of notes including an example that said that when if manager expects interest rates to drop, they will reduce duration of ptf(w/o regard to duration of liability).

Now, under active management, Duration(ptf) does not have to match Duration(Liability); but why does the the manager look to increase duration of ptf on the back of expectation of interest rate drop?

If this question is unimportant, save us both a minute and say "ignore" :-)

Cheers,
Nash

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Seriously, what is your question ?

back against the wall. no retreat no surrender.

manavecplan wrote:
I read a set of notes including an example that said that when if manager expects interest rates to drop, they will reduce duration of ptf(w/o regard to duration of liability).

Where did you read this?

It makes no sense; if you expect rates to drop, you want to increase the duration of your portfolio, not decrease it.

Simplify the complicated side; don't complify the simplicated side.

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manavecplan wrote:

I read a set of notes including an example that said that when if manager expects interest rates to drop, they will reduce duration

Stop reading that person’s notes lol