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Cash flow matching |
Also found in: Wikipedia | 0.06 sec. |
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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. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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The survey showed that more than 90% of respondents still use primarily traditional asset-liability management approaches, such as duration/convexity (93%) and cash flow matching of assets and liabilities (90%), to incorporate liability-side risks into the investment policy process. 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. Given the rapid growth in the credit default swap market, it has been one of our top priorities this year to establish a central payments database that will streamline the cash flow matching process," said John Stewart, head of Credit Operations Europe at JPMorgan Chase. |
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