duration matching strategy
Duration matching strategy
Duration Matching Strategy
An
immunization strategy in which one matches the
duration of
assets in a portfolio to the duration of the liabilities. Duration is the number of years until the
investor receive the
present value of all
income from a bond (including
interest and
principal), and is used to gauge a bond's sensitivity to
interest rate changes. A duration matching strategy is intended to reduce the portfolio's sensitivity to interest rates in order to reduce the
risk of
loss to the holder.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
duration matching strategy
A method of assembling a bond portfolio so that the duration of the portfolio equals the duration of the investor's liability stream. Compare
cash matching strategy.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
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