The answer to this is outlined on page 38, but I don’t fully understand it. If anyone could help I would appreciate it:
When the text vignette says he is using standard immunization – what does that imply?
What exactly is contingent claim risk? (pls explain in very basic english like you are talking to a 5 year old).
Any color on cap risk or interest rate risk would be helpful. If it’s immunized, why isn’t the question saying he’s exposed to something like key rate duration risk instead of interest rate risk in general.
thx in advance