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.
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.