Discuss whether the following statement is true or false:
Two portfolios with matching cash flows are always immunized.

Question

Quizplus · Accepted Answer

Generally,the portfolios with matching cash flows are immunized to interest rates sensitivities except for two circumstances.First,if the cash-flows are matched using a callable bond and interest rates rise,there is always a risk of the bonds being called upon.Second,if the surplus cash flow matching technique is used there is a re-investment risk.If interest rates fall,the cash flows may not materialize to the extent required to service the liabilities.

Discuss Whether the Following Statement Is True or False