1. Investment management.
Arranging that in a portfolio of assets and liabilities the cash flows generated by the assets can be expected to meet the liability payouts either because:
- (1) the assets generate income of the right amount at the right time or
- (2) because the market values of the assets are linked to (positively correlated with) the market values of the liabilities.
2. Interest rate risk management.
Equalising or approximating the modified duration of assets and liabilities in a portfolio, to manage interest rate risk.
3. Interest rate risk management.
Equalising or approximating both the modified duration and the modified convexity of assets and liabilities in a portfolio.
4. Financial reporting - accounting concepts.
The Accruals concept in accounting.