Book 2 page 170. Schweser says: To the extent that assets decline at a greater rate than liabilities in an increasing interest rate environment, which … My question to you guys is “why assets decline decline at a greater rate?”. I definitely missed something; I seem to have a hard time to understand this statement. Anybody?
If Assets have a higher duration then liabilities, they will decline at a greater rate then liabilities as interest rates start to rise… The more important mismatch is assets being in equities instead of debt securities and having a duration mismatch with liabilities. Hope this helps.
Thanks, this is great. Book 2 is so boring… I can’t concentrate reading it. Some readings after I finish I feel I didn’t read it. 
I am surprised to miss the fact that insurance company facing this: D(Asset) > D(Liability).
lxwqh: Its tough to retain a lot in the first read. Hang in there and very soon you will be an expert. 
thanks for encouragement. so far i just felt level 3’s readings are so boring. i wish i could have time and patience to read them again .
I find level 3’s so boring, too. it erode so much passion.