Fixed income - single-period immunization

To imunize a target value or target yield, the portfolio should have:

1- the same duration as the investment horizon

2- PV of CF = PV of liability

Does 1) mean that the maturity of the portfolio will be longer than the investment horizon? (for all the case where we don’t invest in zero coupon, in which case duration=maturity)

I believe so. You generate the cash needed in immunization by rebalancing. So even though the maturities will be past the investment horizon (bc duration is dragged down by coupon payments) you just sell the assets when necessary.


I don’t follow. Can you elaborate? Thanks.

Borrowing is cheaper than selling the asset prior to maturity.