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Cash Flow Matching |
Also found in: Wikipedia | 0.01 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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