It seems like no matter how many times I read that section I cannot retain anything. classical immunization, contingent immunization, multiple liability immunization, cash flow matching, combination matching Is there any technique that hedges perfectly against a shift and twist in the yield curve long-term? the closest i’ve seen is combination matching and present value of distribution cash flows.
I think cash flow matching is the ultimate solution for all. but its difficult and expensive. other than that there is no way of perfectly eliminating imm risk for non-paralel shifts. I- as extentions of classical immunization u can 1- match key rate duration and 2- find the portfolio with min imm. risk (min maturity variance- M^2) II- as extentions of cash flow matching u can 1- use symmetric Cf (borrowing) or 2- match CF of first 5 years and immunize the rest (combination)
I got hammered on the Schweser test 3 immunization question… In one year after cash was received etc… I threw my book across the room and cracked a window in my kitchen : (
Mr.Good.Guy Wrote: ------------------------------------------------------- > I got hammered on the Schweser test 3 immunization > question… In one year after cash was received > etc… I threw my book across the room and > cracked a window in my kitchen : ( LOL
Mr.Good.Guy Wrote: ------------------------------------------------------- > I got hammered on the Schweser test 3 immunization > question… In one year after cash was received > etc… I threw my book across the room and > cracked a window in my kitchen : ( Glad I’m not the only one around who likes to release a little frustration on his books. When I was taking Calculus in college I showed up for class one day with the front and back cover ripped off the text. The Prof thought he was pretty funny when he said, “enjoying the course I see.”