“> Introduction 4 Fixed income -M
FI secuai provide : are (fou. boed) sky
v a
1, Diver sification Benefits. Darin motket shess as yenie
L. Regwleo cash fos. ( Jadoler bond purdfohso bélances pur ask and ay
3. Iiflahon fedging. if ae Inked ‘bonds rehn Qed wien an
L.FI mordeks : vy oo 2) 7 pte maples,
ci | Mg cat Hae ed rn
ie eS t . Game. as ate oe
Fenchmorl | deviahon | Mevintion |
4 = Pot Aeshe
Mechanism =| Da = De CF y= CF
Ss Match | large %
field ate Pecele] shift None ae Heed nny ust hth dev.
assumpnomn E rT Taser
Rebelancins Frequent aly ti | Trenover | Shuler & - Ther. higher pe
a Frlhhe 4 ze cpm =? Wo pre... * Pte indexing is not quel ehetn
: ; Al ‘
Tick, Tervest no immua tisk . On ay as index . hetause fade managment catLinki lity fave of momdate s Ayboid proaches are: : é
+ anngent immunization hen” port value > DY of Nal, Signs > achye
« Horjzon cos 57 fob = we OF ee \ LP pb her oD medi
Bad morkel Iiguidi Mrtrix (rey es Lore a) treded bard )
ard hold eek prkr less” lgnid land. Wchve snvestas sell
ep tefac ae
Fixed meme derjvattves more dgatd 2 mnderlyiy bind.
ER = Yield income — Paya) ~ Pees Heng jevecage Tope) tebuen ~ Coot Gh
t falldoun tehen = re Jeverased port Pe et eh
(ocumes no inferes} hl B= Trt ws = re wn)
FT apa -md-A BS Z (ony (ay) Methods df ee ¢
lo NV — Magy
fa ib fh 785 (=) + Findwres contract Te ah
+ Expeck
ychahon.
agreement
fae i component} IS fang gield ) ‘ Halled ingfaument (cope 16-15 lil
a x, » Repurchase agreement.
c an appre
“Fh Bin a ate invest YTM\ gently lending
= ae other frche: Such as
—-qichness/ cheapness aLisbili
For single fiebil
Simplitsd js Buy zero compon Sond.
44 value = ae +z C (ay
MD+ MD + Dispersion
a+ CF veld)
CF pel IS entive pet LKR
Decca = Cone py of (Fe
spetsion p= (42) * “Sr yep
driven and
c=
Investor's investment hozjzon = Dd (Mca
Inerest rele righ is immunized.
a assump hn ig
: a
5 Vahen |] shift act os tye
see ym" piel k
VT copemiy ~~
Lae
ew
» Sammory , immunize single Tcl
1 mniful mvop osset’ x PY & Nels)
ACF zield ~4 YiMzero ey
rk 1 A.
index besed shekyy
2. Mp = Nichi lity's due dete.
$. Minimizes the polio convexity
This portbhio reyelcly rebalanced
ver tre horiven 40” Marrfsin donget Dy
Because MD changes ag time passes
and as yield “change.
Mancyer ~ trade St Gelsieen
traksachn cot from Ve bolowerng and
allocsing some dita tion p.
Slauctete sk teduced 5 Mini midiy
dispersion , hom barbell "to billed 2
ysing Cte meosuze stuctuve Usk
JS more advan
dispersion.
fege than wsinyEMT hie tC 7 bpptoache
ae ik ee ® devivihve over) é
Dedicated assed fibt AHA bends ) Asset BPV + Ng Fabres BPV
match closely the ae and CF. = Licbilily portfolio BRV
Accontin: hae (Vanish debt Np = SPY, — BPVA
% selling HO asset) : BPVr
loshin ha constraints phen IE Nf ro , go5s fon patures
seouribes awe not sold t meet bligafia) if Mp bx CE>4
@® ducotin matching , Invite parce pid by dager F ptt «cr
BPV= MD-V- 0.0001 (18P) ) Fubnes BPV= “BEV cr
1. PVA PYL Ferm
2. RPV APV,,
3. Asset dispersien and carver > dibilty.
4, Reyulerly rebalance -
Hf, th = ovethedye futuees (1 => FP
if URS waar Phrres
lntin a aii
MV o asset > flab.
siylus > Invested any asset “og.
U< theeshold => jmbunizedion Gadde
js on, Pursue is vetine a debt
By docs cox Bhan more conserva e-
ia matching apptoach,
pee‘2 } G years : T years Z years
, A
Stort pork Date 0 (Nous) Beh tonent- death
i mb
Bets: mM: 6 Wo mb W 1 M. 6- Wr
Bo = ad - ca
4 (797 A 14U = (792 i PBo ae WT se (49
Bm, y tes = mbit 4 A
Abo= 1)? -} ‘CesT. meee PRO = pryT ie Tiny
(Ateumujated bene fit Hi satim) Projeced bench obligation :
2) Pension asse{-x D-2 Tongox (4 AR HOM
4) Dygo i Peso ~ & —740X -
4) Fi duetes -@ ae hedge xuny Signitieent daily cosh inflows ond addon.
) she siop. — Asel Boy + [np SEEPS] = Lidkilily BV
E(Q>Y = Gan Teceive fred swap >
select Wa utio [o- 0]
Mey mandeled [2s- 752] =D prete at A an alleuckle range .
3. Use. stuphion ("eeeive Pred) 253°" Reteive fried SHEP. fess
fe nike pape ph £07 Ser ppp NEO! tr
Yo sh ton
eZ cast cellar. ecennet Above. 5Y.
8s Joy susp tion i Tad Collareee nak oat > 8
‘
: Bond Indexes:
. “Steuctweal tisk — (Tuist im yell as Pure jndeyin ¢
Frset convex > Jick convex = )mit Digg . Enhanced i Le
« Made] risk. (> mon assumption)
« Mecsurement error iE ihn eighte
average patho A and L ncfood
fetplic GF.
+ Spreod tusk
«Subtle Tsk (SPH VK-10é Hye eau )
: Comber Wk :
cpt oF
"
- Matching D
~ Maley yD) qo D
— Match Sy Leightiny expasure to
ee ley. sec fet
= Medching secta mahaihy
co ‘peikts A IM ndex
— Matching issue exposure,
j a rick. sce tae wale! — etching PY G disitubr Go
~ (Meter becomes exhaus ded inde plays t ue cost jn pure sndey.
Bums prlem (Greake alloca =| S- fede Find expense raps
HO ALE Fs felerea Peed ek “ee =
» Smoke Lets (use ¢ Sing, Pansat
Jes 6 a fe:
-Laddet vs Bullet Vs Site
Lomvex > garbell > Jadder > Bullet.
= Wolly => a pght =
= Direcl imveshy ajematve .