mar350

You have to keep rebalancing an immunized portfolio.

bboo

I say B. How likely is it that you will cash flow match with nothing but zero-coupons?? Only in this case would the upkeep be less time consuming and expensive.

IMHO the root of this question lay in the "easier to maintain" statement. They are going for the sucker that thinks "match the cash flows and then your done! easy!."

Remember that a match at first is not matching later due to convexity and duration. I say B B B.

infinitybenzo

still say A

strikethree

Answer please

NakedPuts2011

It should be B

justin88

A- if the cash flow from bond already match the liability, there's no need to rebalance once constructed. hence easier to maintain after construction. the hard part is finding the right bond to match the cashflow of liability.

ohai

from reading Stalla, my understanding is that Cash flow matching is more expensive upfront, but easier to maintain.

Immunization costs less upfront, and is more difficult to maintain due to having to rebalance all the time.

I say A.

Where is this question from?