Classical vs Contingent Immunization vs Cash Flow Matching latest, assets, mature, matching, liability

yuoska

What are the differences?

-Classical is just matching the durations of assets to that of liabilities
-Contingent Immunization allows for profits
-Cash flow matching - Buy zero coupon bond to mature at latest liability and work backwards

?

cityboy

More or less.

Classical immunization is protected from a one-time shift in rates.

Contingent immunization is triggered once you reach a breakpoint.

Cash flow matching is most conservative. Not immunization at all, just making sure there will be enough cash flow to cover liabilities.