Would you still prefer bullet, when for barbell, reinvestment at a higher rate for a longer time period, and capital gain on the long-end? I am thinking barbell may be a better strategy.
a barbell would have lower duration and not take full advantage of the drop in LT rates. Do you have #'s or a specific question you are looking at?
Reading 29, section 4.1.2.3, Minimization of Immunized Portfolios: The text mentions that when ST go down, LT go up barbell performs worse than bullet. I am thinking about the opposite case.
ok, i just read that. I agree with you in that, if you are just thinking about the price of the portfolio, i don’t think it would be hard to provide a numerical counter example to that claim. However, I think what they are getting at is that the immunization risk of the barbell is much worse than the bullet in this scenario. I think it’s a poorly worded section. I would like to hear what others think on this.
bump.