Funding a portion of assets with equity capital means that hedging risk does not require perfect matching of the assets and liabilities.

Question

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When a portion of assets is funded with equity capital, it means that the investment is not solely reliant on debt financing. This reduces the pressure to match the duration of assets and liabilities perfectly and provides a cushion to absorb any changes in the underlying asset values. Therefore, hedging risk does not require perfect matching of the assets and liabilities.

Funding a Portion of Assets with Equity Capital Means That