9-31 Matching the maturities of assets and liabilities is not a perfect method of immunizing the balance sheet because the timing of the cash flows is likely to differ between the assets and liabilities.

Question

Quizplus · Accepted Answer

Matching the maturities of assets and liabilities may not fully protect the balance sheet from interest rate risk if the timing of cash flows differs between the two. For example, if interest rates rise before the maturity of the assets, the market value of those assets may decline, while the liabilities will continue to accrue interest at a higher rate, leading to a potential mismatch. Therefore, other risk management strategies, such as duration matching or cash flow matching, may be necessary in addition to maturity matching.

9-31 Matching the Maturities of Assets and Liabilities Is Not