Can anyone simply explain what this is? I’m not quite getting it…
which ss ? which reading ? Normally disintermediation means cutting middlemen / middle layers out.
It pertains to investing in fixed rate annuities (yay life insurance). Basically, you receive a fixed percentage return for the initial investment. However, when rates jump… in laymen’s terms… you bail ship to invest at a higher rate as it’s yielding a higher return. The act of taking your money out to invest with another product for a higher rate is called disintermediation. Source: 2007 L3 Exam - see solutions page for Q6
Yeah this was in the ALM section for life insurance companies.
you borrow money against your policy or even cancel it that creates an imbalance between duration of assets & liabilities, plus creates additional need for liquidity - hope I have this right
it creates imbalance between assets&liabilities, that’s right, and what is also important is that it led to shorter durations of portfolios…