Objective of Immunization Strategy in Liability Management

Easy Liability-driven Strategies Immunization

ABC Corporation is a pension fund with a liability duration of 10 years, indicating that they have fixed cash outflows that need to be met in this timeframe. In order to manage their fixed income portfolio effectively and reduce the risk of interest rate fluctuations impacting their ability to meet these liabilities, ABC Corporation is considering an immunization strategy.

Which of the following statements best describes the objective of an immunization strategy for ABC Corporation?

To ensure that the present value of assets equals the present value of liabilities at a single point in the future.

To actively manage the portfolio to seek higher returns regardless of interest rate moves.

To create a portfolio that matches the cash flows of the liabilities at various points in time.

Hint

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