9-44 Immunizing net worth from interest rate risk using duration matching requires that the duration match must be realigned periodically as the maturity horizon approaches.

Question

Quizplus · Accepted Answer

Duration matching is a strategy used to immunize net worth from interest rate risk by matching the duration of assets and liabilities. However, as the maturity horizon approaches, the duration match must be periodically realigned to maintain the immunization. This is because the interest rate risk changes as the time to maturity reduces. Therefore, option A is correct.

9-44 Immunizing Net Worth from Interest Rate Risk Using Duration