Immunization and Cash Flow Matching Construction
Free SOA Exam FM (Financial Mathematics) lesson in General Cash Flows, Portfolios, and Asset-Liability Management. 16 min read, ~2,378 words.
Redington: solve and, then verify. Full immunization: same system, but assets must bracket the single liability ( ). Any rate change. Cash flow matching: work backwards from the last liability; later bonds' coupons reduce earlier needs. Cheapest exact match: cover each liability date with the highest-yielding asset that delivers cash...
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What this lesson covers
- Content
- Example 1
- Example 2
- Example 3
- Example 4
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- 5c
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