Immunization of a FIs net worth requires the duration of the liabilities to be adjusted for the amount of leverage on the balance sheet.

Question

Quizplus · Accepted Answer

Immunization of a financial institution's net worth requires duration matching between assets and liabilities, but also takes into account the amount of leverage on the balance sheet. This means adjusting the duration of liabilities to minimize the impact of interest rate fluctuations on the net worth.

Immunization of a FIs Net Worth Requires the Duration of the Liabilities