What is a portfolio immunization?
Portfolio Immunization is a strategy that is used to manage your portfolio with a financial goal. This goal can be determined with your investment to a specific amount or at a certain point. Further, this strategy is used to fund a future liability. Immunization is one of two kinds of dedicated portfolio strategies.
Why an investor would want to immunize a portfolio?
Bond immunization is an investment strategy used to minimize the interest rate risk of bond investments by adjusting the portfolio duration to match the investor’s investment time horizon.
What is classical immunization strategy?
Classic immunization can be defined as the creation of a fixed-income portfolio that produces an assured return for a set period, regardless of parallel shifts in the yield curve.
How is immunization achieved?
Active immunisation – body generates its own response to protect against infection through specialised cells and antibodies, as stimulated by vaccines. Full protection takes time to develop but is long lasting. Passive immunisation – ready-made antibodies are passed directly to the person being immunised.
What is Redington immunization?
In finance, interest rate immunisation, as developed by Frank Redington, is a strategy that ensures that a change in interest rates will not affect the value of a portfolio.
What is the difference between bond immunization and cash flow matching?
In cash flow matching, cash flows must be available before a liability is due, whereas, in multiple immunizations, liabilities are funded from cash flows derived from portfolio rebalancing on the basis of dollar durations.
What is immunization explain?
Vaccination: The act of introducing a vaccine into the body to produce protection from a specific disease. Immunization: A process by which a person becomes protected against a disease through vaccination. This term is often used interchangeably with vaccination or inoculation.
What are different types of immunization?
Four types of vaccines are currently available: Live virus vaccines use the weakened (attenuated) form of the virus. The measles, mumps, and rubella (MMR) vaccine and the varicella (chickenpox) vaccine are examples.
What is the purpose of immunisation?
Immunisation gives protection against some infectious diseases. Vaccines stimulate the body to produce antibodies that fight infection. Immunisation is also known as ‘vaccination’, ‘jab’ or ‘injection’.
How is Macaulay calculated?
The Macaulay duration is calculated by multiplying the time period by the periodic coupon payment and dividing the resulting value by 1 plus the periodic yield raised to the time to maturity.