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 these.

Question

Quizplus · Accepted Answer

Immunization is an active investment strategy that requires frequent rebalancing as maturities and interest rates change. It involves adjusting the portfolio duration to match the duration of liabilities, and not simply choosing an asset portfolio that matches an index. Additionally, there is likely to be a gap between the values of assets and liabilities in most portfolios, which immunization seeks to mitigate. Finally, durations of assets and liabilities do not fall at the same rate, making it necessary to actively manage the portfolio to maintain the desired level of immunization.

Immunization Is Not a Strictly Passive Strategy Because