WTF is that again?
Thanks作者: Analti_Calte 时间: 2011-7-13 16:32
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...作者: Colum 时间: 2011-7-13 16:32
Yes, I believe you're right. Found that in Schweser, thanks for the reminder. Also they need to prepare for higher liquidity reserves.作者: ohai 时间: 2011-7-13 16:32
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).
