Portfolio immunisation: Difference between revisions

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imported>Doug Williamson
m (Spacing 21/8/13)
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1.
In relation to market interest rates, a portfolio is said to be immunised if its value at the end of the holding period is the value predicted at the start, regardless of the movement of interest rates in between.
In relation to market interest rates, a portfolio is said to be immunised if its value at the end of the holding period is the value predicted at the start, regardless of the movement of interest rates in between.


Immunisation can be achieved by holding a portfolio whose duration is equal to the intended holding period.  For example, a zero coupon bond of maturity = holding period.  
Immunisation can be achieved by holding a portfolio whose duration is equal to the intended holding period.   
 
For example, a zero coupon bond of maturity = holding period.  


Also an existing portfolio can be immunised by adding other appropriate instruments to it to achieve the required portfolio duration = intended holding period.
Also an existing portfolio can be immunised by adding other appropriate instruments to it to achieve the required portfolio duration = intended holding period.


2.
2.
Similar risk management techniques relating to other market prices (or market rates).
Similar risk management techniques relating to other market prices (or market rates).


== See also ==
== See also ==
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* [[Matching]]
* [[Matching]]
* [[Portfolio]]
* [[Portfolio]]

Revision as of 13:14, 21 August 2013

1.

In relation to market interest rates, a portfolio is said to be immunised if its value at the end of the holding period is the value predicted at the start, regardless of the movement of interest rates in between.

Immunisation can be achieved by holding a portfolio whose duration is equal to the intended holding period.

For example, a zero coupon bond of maturity = holding period.

Also an existing portfolio can be immunised by adding other appropriate instruments to it to achieve the required portfolio duration = intended holding period.


2. Similar risk management techniques relating to other market prices (or market rates).


See also