The Numbers Provided Are in Millions of Dollars and Reflect

question 83

Multiple Choice

The numbers provided are in millions of dollars and reflect market values: 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 savings accounts.
• 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.

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