Immunization is not a strictly passive strategy because
A) it requires choosing an asset portfolio that matches an index.
B) there is likely to be a gap between the values of assets and liabilities in most portfolios.
C) it requires frequent rebalancing as maturities and interest rates change.
D) durations of assets and liabilities fall at the same rate.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

Immunization is not purely passive because it necessitates frequent rebalancing of the portfolio to maintain the match between the durations of assets and liabilities, especially as interest rates change and securities mature. This active management component is necessary to ensure that the portfolio remains immunized against interest rate risk.

Immunization Is Not a Strictly Passive Strategy Because