We are discussing a standard immunization approach with NON-CALLABLE bonds… The manager is concerned with interest rate risk, contingent claim risk, and cap risk. Are these risk concerns correct? A) Yes B) No, because interest rate risk is not a factor. C) No, because contingent claim risk is not a factor The solution says A is correct, but why would contingent claim risk be a factor with NON-CALLABLE bonds? Please help… Thanks in advance.
discussed at length in this thread - http://www.analystforum.com/phorums/read.php?13,1147030,1152493#msg-1152493