Horizon matching is a combination of
A) cash-matching dedication and interest rates swaps.
B) cash-matching dedication and immunization.
C) interest rate swaps and immunization.
D) enhanced indexing and immunization.
E) enhanced indexing and interest rate swaps.

Question

Quizplus · Accepted Answer

Horizon matching is a combination of cash-matching dedication and immunization, which involves matching the cash flows from a portfolio of assets with the cash outflows of its liabilities. This helps to ensure that the portfolio will be able to meet its future obligations, regardless of changes in interest rates or other market conditions. The use of immunization techniques, such as duration matching or convexity matching, can further enhance the risk management benefits of cash-matching dedication. Interest rate swaps and enhanced indexing are not typically part of a horizon matching strategy.

Horizon Matching Is a Combination of