Hi, Can someone clarify if cashflow matching is more expensive than multiple liability immunization and if the risk is at least as high as multiple liability immunization? I don’t understand the paragraph in schweser notes page 40…“As such, a minimum risk immunization approach to funding multiple liabilities is at least equal to cashflow matching, and probably better, since it would be less expensive to fund a given stream of liabilties”. Having difficulty understanding this…either my English sucks or the way they word it isn’t great (I’d gladly take the former lol) thanks.
Cashflow matching requires more funds than immunization, as you need to hold more cash, among other reasons. This makes it more expensive as you’re getting a much lower rate of return.