Cash flow matching


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Related to Cash flow matching: Duration matching strategy

Cash flow matching

Also called dedicating a portfolio, this is an alternative to multiperiod immunization that calls for the manager to match the maturity of each element in the liability stream, working backward from the last liability to assure all required cash flows.

Cash Flow Matching

The practice of matching returns on a portfolio to future capital outlays. That is, cash flow matching involves investing in certain securities with a certain expected return so that the investor will be able to pay for future liabilities. Pension funds and annuities perform the most cash flow matching, as they have future liabilities that are both large and relatively easy to estimate. Portfolios that perform cash flow matching usually invest in low-risk, investment-grade securities. The practice is also called portfolio dedication, matching, or the structured portfolio strategy.
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The Kruskal Wallis nonparametric test of equality of means was applied and rejected the null hypothesis in all the years in Cash Flow Matching, Svensson and Gerin methodologies.
We've seen the value that our Trade Information Warehouse's automated netting and settlement functionality has brought to the OTC credit derivatives market and we believe the Equities Cash Flow Matching service can now also deliver similar benefits to another OTC derivatives asset class.
It also leverages trade and account information captured in the Deriv/SERV trade system enabling the service to find and match payments more quickly, thereby increasing the level of efficiency of the cash flow matching process.

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