Fixed Income: When we match the durations of assets and liabilities, we match the Macaulay Duration or Modified Duration?

CFA Level III
#1

Thank you very much in advance.

#2

CFA Institute is very sloppy on this. They match the modified (or effective) duration of the assets to the Macaulay duration of the liabilities.

Sigh.

#3

Haha I noticed this too. So weird but we can extract the Macaulay from effective I think right?

#4

You can get to Macaulay from modified, but not necessarily from effective.

#5

Oh ya effective is the one for options when we did those fun binomial trees at level II :slight_smile: …modified is the easier one with the formula.