Can it be that liability duration is 10 years, but time horizon is 30 years?.. HMM
Yes…think about it. Also the Duration of a 30yr T-Bond is not 30, its probably closer to 15…
let me mix this up some… Life insurance vs non-life. Non-life has shorter time horizon, however, their asset holding has longer maturity than life insurance company.
Dooooodss!!! my biggest investment pet peeve is when people fail to distinguish between duration and maturity. even some of the official text fails to do so. maturity and duration are two different things. for a liability, the maturity is also known as time horizon.
That distinction is typically made b/c shorter term bonds have durations close to their maturity and it can be a rough guess to estimate their duration.
My thoughts exactly needhelp!!!
Duration = Maturity for zero coupon bonds. (I had to miss a problem on the L2 exam to get this drilled into my head. Grrr…) Any cash flows that come before maturity reduce duration. The bigger the cash flows (i.e. coupon payments), the more it is reduced. The closer to maturity, the less the reduction. I didn’t realize (but now that I think about it, I suppose it makes sense) that when the maturity length goes out substantially, the duration can be substantially reduced relative to the maturity: ie. a 30 year bond could have a duration of as little as 15, whereas I might have guessed something more like 25 or 23.
ws Wrote: ------------------------------------------------------- > let me mix this up some… > > Life insurance vs non-life. > > Non-life has shorter time horizon, however, their > asset holding has longer maturity than life > insurance company. That is because they want to take advantage of long term tax exempt bonds 
i do understand difference between maturity and duration. Question was more about Pension fund liabilities. I would assume they would more clustered together around maturity date resulting in duration to be close to maturity…