CFAI Volume 4- question # 10 I do not understand the answer-I picked C. risk of parallel shift must also be considered. I think this is correct- isn’t it? Credit risk also have to be considered.
please post the question. I will help you out after
derswap07 Wrote: ------------------------------------------------------- > CFAI Volume 4- question # 10 > > I do not understand the answer-I picked C. risk of > parallel shift must also be considered. I think > this is correct- isn’t it? Credit risk also have > to be considered. risk of NON parallel shift must also be considered. Single liability immunization takes care of one time parallel shfit in yield curve.
derswap07, My understanding is that as long as the 2 conditions mentioned in statement #1 are met, then there will be no risk from one time parallel shfit in yield curve. But credit risk is remained.
Immunization assumes a ONE TIME parallel shift in the yield curve. So now there are two risks to be considered: a) Credit risk 2) NON-parallel shift int he yield curve