Abstract
The notion of duration-matching, well-developed in the 1980s in nominal terms, is here extended to the dual durations of price sensitivity to real interest rates and to inflation rates. All assets (and liabilities) can be characterized more accurately using two durations instead of one. Equities and many other assets and instruments have different real interest rate and inflation durations, as does a liability. Duration-matching offers a secondary pension risk control measure after surplus optimization. The author develops a solution that duration-matches assets with the pension liability, and shows how to integrate it with surplus optimization, achieving better pension risk control in the process.
- © 2004 Pageant Media Ltd
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600