Bond immunization

I am not too clear about the difference between multi-liability and cash flow- can anybody lay it out?

With all due respect, you should probably give the chapter another reading. They’re very different and yet fairly crucial concepts. In short, multiple liability immunization matches the aggregate durations of your assets and liabilities (with some specifications, like the range of durations of your assets must be larger than liabilities, etc.). Cash flow matching utilizes bond coupon and principal payments to match your liability stream. So one matches durations, one matches cashflows. Again, though, you really need to re-read that entire section if you’re asking this question this late in the game.

1)CF matching is laddered bond strategy 2)Manager match last liability with (P+C) of last bond. 3)Second last liability with coupon of last bond and (P+C) of second last bond and so on 4)Not an immunization startegy 5)Inherent RI risk. Tming of coupon may be on or before liability due date. 6)Costly than ML 7)Portfolio value zero after last liabilty is paid 8)USe linear programming and recursive procedures ------------------------------------------------------------------------------------------------- 1) ML approach is immunization approach 2)Minimize IR risk and consider parallel shift in YC 3) Less costly than CF 4)PV of Assets =PV of liabilities 5) Weighted average duration of assets =wa duration of liabilities 6)Distribution of duration of assets shlould be wider that that of liabilities. 7)Computer models for Non parallel shift in YC

Captain Barbosa Wrote: ------------------------------------------------------- > 1)CF matching is laddered bond strategy > 2)Manager match last liability with (P+C) of last > bond. > 3)Second last liability with coupon of last bond > and (P+C) of second last bond and so on > 4)Not an immunization startegy > 5)Inherent RI risk. Tming of coupon may be on or > before liability due date. > 6)Costly than ML > 7)Portfolio value zero after last liabilty is > paid > 8)USe linear programming and recursive procedures > -------------------------------------------------- > ----------------------------------------------- > 1) ML approach is immunization approach > 2)Minimize IR risk and consider parallel shift in > YC > 3) Less costly than CF > 4)PV of Assets =PV of liabilities > 5) Weighted average duration of assets =wa > duration of liabilities > 6)Distribution of duration of assets shlould be > wider that that of liabilities. > 7)Computer models for Non parallel shift in YC Thanks for making it clear- I knew the basics but couldn’t list them out.