Immunization through duration matching of assets and liabilities may be ineffective or inappropriate because
A) conventional duration strategies assume a flat yield curve.
B) duration matching can only immunize portfolios from parallel shifts in the yield curve.
C) immunization only protects the nominal value of terminal liabilities and does not allow for inflation adjustment.
D) None of the options are correct.
E) All of the options are correct.

Question

Quizplus · Accepted Answer

A) Conventional duration strategies often assume a flat yield curve, which is a simplification and not always reflective of real-world conditions. B) Duration matching typically immunizes a portfolio against parallel shifts in the yield curve, but it may not protect against non-parallel shifts or twists in the yield curve. C) Immunization strategies focus on protecting the nominal value of assets to meet liabilities, but they do not inherently adjust for inflation, which can erode the real value of the assets and liabilities over time.

Immunization Through Duration Matching of Assets and Liabilities May Be