SOA Exam FM Sample Question 147
Study guide: Exam FM-2
Determine which of the following statements regarding asset-liability management techniques is true.
- A) Redington immunization requires that the convexity of the liabilities is greater than the convexity of the assets.
- B) An advantage of the Redington immunization technique over the cash-flow matching technique is that the portfolio manager has more investment choices available.
- C) Both Redington immunization and full immunization are based on the assumption that the yield curve has higher yields for longer term investments.
- D) A fully immunized portfolio ensures that the present value of assets will exceed the present value of liabilities with non-parallel shifts in the yield curve.
- E) A cash-flow matched portfolio requires less rebalancing than a Redington immunized portfolio, but more rebalancing than a fully immunized portfolio.
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Concepts tested
- Immunization
- Duration
- Portfolio
- Asset-Liability Portfolio
- Duration Matching
- Cash Flow Matching
- Redington Immunization
- Full Immunization
- Convexity