Schweser Book 3 SS 9 p 128 For the exam section: “If MARKET RISK is the primary concern, you could add that the manager could match the present value of distribution of cash flows in the index to ensure the portfolio has the same interest rate sensitivities as the index.” The market risk they are referring to hear would be the fluctuation of current interest rates correct? The PV Dist of CFs is just a way of measuring reinvestment risk for the portfolio’s cash flows right?
pv would not necessarily be a measure of, but a way of keeping pace with the index and yes the risk would be reinvestment. that is my understanding