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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References in periodicals archive

Especificamente, estimamos as expectativas inflacionarias pelo metodo Cash Flow Matching e comparamos com as do metodo de Svensson (1994) e com as expectativas coletadas em pesquisa.

Apos a estimativa do premio, utilizamos o poder preditivo das variacoes da expectativa inflacionaria para examinar quao bem as estimativas inflacionarias derivadas pelos metodos de Cash Flow Matching e por Svensson preveem futuras variacoes na inflacao, descontados ou nao do premio de risco de inflacao.

De forma geral, variacoes na inflacao implicita, seja estimada por Svensson ou por Cash Flow Matching, tendem a superestimar as efetivas variacoes do indice inflacionario.

Inflation expectation and implicit inflation: does market research provide accurate measures?/Expectativas inflacionarias e inflacao implicita: sera que pesquisas de mercado fornecem medidas precisas?

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