Does Cash flow matching strategy eliminates the risk associated with non parallel shift in the yield curve ?
As long as the asset cash flows exactly match the cash requirements of the liabilities, then yes. If they don’t however (missing by a few days or so), then small reinvestment risk arises, which puts it at risk to non parallel shifts.
My understanding: Firstly reinvestment risk is inherent in cash flow matching so it cannot be eliminated. Secondly, cash flow matching at the initial portion of the liability stream does lower the risk associated with non-parallel shift since the curvature of yield (non-parallel shift) is often at the short end (1st few years). This is in fact one of the adv of horizon matching.