Podcast
Questions and Answers
What is a key advantage of a laddered portfolio?
What is a key advantage of a laddered portfolio?
- Constant need for reinvestment
- High market price volatility
- Dependence on short-term securities only
- Protection from shifts and twists in cash flows (correct)
How are bonds managed in a laddered portfolio over time?
How are bonds managed in a laddered portfolio over time?
- Matured bonds are reinvested at lower rates
- Bonds are sold immediately upon maturity
- Matured bonds are reinvested at higher rates (correct)
- Bonds are reinvested randomly without considering rates
What does dollar cost averaging have in common with laddered portfolios?
What does dollar cost averaging have in common with laddered portfolios?
- Focus on short-term securities only
- Dependency on market price volatility
- Ignoring interest rates in reinvestment
- Similarity in reinvesting funds over time (correct)
Which feature of the laddered portfolio is evident in Exhibit 13?
Which feature of the laddered portfolio is evident in Exhibit 13?
How does a laddered portfolio balance interest rate risks?
How does a laddered portfolio balance interest rate risks?
What is the primary benefit of diversifying cash flows across the time spectrum?
What is the primary benefit of diversifying cash flows across the time spectrum?
What is the purpose of liability-driven investing (LDI)?
What is the purpose of liability-driven investing (LDI)?
How is immunization strategy related to liability-driven investing?
How is immunization strategy related to liability-driven investing?
What is a key advantage of index-based investing in fixed-income markets?
What is a key advantage of index-based investing in fixed-income markets?
Why is creating and tracking an index in bond markets more challenging than in equity markets?
Why is creating and tracking an index in bond markets more challenging than in equity markets?
Which investment technique involves tailoring investments to match a specific liability profile?
Which investment technique involves tailoring investments to match a specific liability profile?
How do liability-driven investing and index-based investing differ in their approach?
How do liability-driven investing and index-based investing differ in their approach?
What does the first derivative in the optimization problem lead to when minimizing the difference in the change of assets and liabilities?
What does the first derivative in the optimization problem lead to when minimizing the difference in the change of assets and liabilities?
Why should the dispersion of assets be as low as possible when immunizing multiple liabilities?
Why should the dispersion of assets be as low as possible when immunizing multiple liabilities?
In what scenario should changes in the market value of the asset portfolio closely match changes in debt liabilities?
In what scenario should changes in the market value of the asset portfolio closely match changes in debt liabilities?
How does a more convex portfolio generally perform compared to a less convex portfolio?
How does a more convex portfolio generally perform compared to a less convex portfolio?
Why is it important for the dispersion of assets to be greater than or equal to the dispersion of liabilities during immunization?
Why is it important for the dispersion of assets to be greater than or equal to the dispersion of liabilities during immunization?
What is the main purpose of immunizing multiple liabilities using interest rate risk hedging strategies?
What is the main purpose of immunizing multiple liabilities using interest rate risk hedging strategies?
