Single Period Immunization

CFA Level III
#1

Two step:

  1. Duration of Asset = Duration of Liability

  2. PVA = PVL

Does it mean Dollar duration A = Dollar duration Liability?

#2

Jep. Point 1.

#3

Jep?

#4

Jep. = Yes. [German slang]

#5

Cool, tks. Learn new thing. But why u said point 1, i thought need to combine two points?

#6

Why combining?

  1. DD assets = DD liabilities

  2. PV assets = PV liabilities

OR

  1. MDUR assets = MDUR liabilities

  2. PV assets = PV liabilities

#7

How about

  1. DD assets = DD liabilities

  2. PV assets = PV liabilities

OR

  1. MDUR assets = MDUR liabilities

  2. Market value of assets = Market value of liabilities

  3. PV assets = PV liabilities

#8

Shouldn’t be point 2 and 3 the same?

#9

Yes, what I mean is you need to have both 1 and 2 holds.

  1. MDUR assets = MDUR liabilities

  2. PV assets = PV liabilities

Then you can have DD assets = DD liabilities

(I thought u mean point 1 is we can bypass point 2?)

#10

I think we always need both points, but point 1 could be either DD or MDUR.

#11

  1. PV of assets = PV of Liabilities

  2. The Composite duration of the portfolio =The composite duration of Liabilities

  3. The distribution of durations of Individual portfolios ASSETS must have a WIDER range than the distribution of the LIABILITIES.

#12

I always thought that this point is only a need in MULTIPERIOD immunization?

#13

Got it. Now i understand ur point. Cheers.

#14

It’s mutiple-laibility immunization approach?