Disentermediation

cfa10yrplan

WTF is that again?
Thanks

Analti_Calte

isn't it when you cash in your life insurance (or whatever) policy early? so you need to up liquidity to account for this. if interest rates are rising, could happen more b/c folks cash in and could reinvest their $$ at higher rates.

correct me if i'm wrong someone. is one of those things that has sort of shortened duration for life insurance co's...

Colum

Yes, I believe you're right. Found that in Schweser, thanks for the reminder. Also they need to prepare for higher liquidity reserves.

ohai

correct.

Rates rise, people cash out at surrender values, reinvest at higher rates. Drives liquidity needs higher at a time when surplus could be falling (if there is some duration gap between assets and liab).