Liability Funding Strategies. General Principles of Asset/Liability Management Structuring a Portfolio to Satisfy Multiple Liabilities Extensions of Liability Funding Strategies Combining Active and Immunization Strategies. Asset-Liability Management.
Choose assets to meet the demand of liability. Four types of liabilities:
Type I liabilities – fixed-rate deposit, Guaranteed investment contract
Type ii liabilities – life insurance
Type iii liabilities – floating-rate CD
Type IV liabilities – property insurance, pension
How about the portfolio manager buys $8,820,262 par value of a bond selling at par with a 12.5% yield to maturity that matures in 15 years?
How about the portfolio manager buys $10,000,000 par value of a bond, coupon rate 10.125%, yield to maturity 12.5% that matures in 8 years?
See the formula on page 556.