问题如下:
Doug Kepler, the newly hired chief financial officer for the City of Radford, asks the deputy financial manager, Hui Ng, to prepare an analysis of the current investment portfolio and the city’s current and future obligations. The city has multiple liabilities of different amounts and maturities relating to the pension fund, infrastructure repairs, and various other obligations.
Ng observes that the current fixed-income portfolio is structured to match the duration of each liability. Previously, this structure caused the city to access a line of credit for temporary mismatches resulting from changes in the term structure of interest rates
Kepler asks Ng for different strategies to manage the interest rate risk of the city’s fixed-income investment portfolio against one-time shifts in the yield curve. Ng considers two different strategies:
Strategy 1: Immunization of the single liabilities using zero-coupon bonds held to maturity
Strategy 2: Immunization of the single liabilities using coupon-bearing bonds while continuously matching duration.
A disadvantage of Strategy 1 is that:
选项:
A. price risk still exists.
B. interest rate volatility introduces risk to effective matching
C. there may not be enough bonds available to match all liabilities.
解释:
C is correct.
It may be impossible to acquire zero-coupon bonds to precisely match liabilities because the city’s liabilities have varying maturities and amounts. In many financial markets, zero-coupon bonds are unavailable.