Cushion spread understand, return, exactly, liability, discounted

jbaldyga

Realizing I don't understand this as well as I thought I did.

Dollar safety margin = Asset - PV of liability discounted at risk-free rate
Cushion spread = Target immunized return - return at which asset exactly meets liability

Right?

NakedPuts00

So if our portoflio is doing better than Liability (we have cushion) so we can take some risk (active management) but as soon we hit min return then go back to immunization...

Darien

Right thanks, OK, but what I mean is, wouldn't minimum required return = (FV of liability/PV of asset)?

justin88

Would the minimum required return differ from the return at which the asset meets the liability?

pennyless

wrong minimum required return