The Shortcomings of This Strategy Are the Following Except

question 98

Multiple Choice

The shortcomings of this strategy are the following except

• A)duration changes as the time to maturity changes, making it difficult to maintain a continuous hedge.
• B)estimation of duration is difficult for some accounts such as demand deposits and passbook savings account.
• C)it ignores convexity which can be distorting for large changes in interest rates.
• D)it is difficult to compute market values for many assets and liabilities.
• E)it does not assume a flat term structure, so its estimation is imprecise.
• [Refer to: 9-121]

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