The Statement That a Portfolio Is Immunised Using Duration Matching

question 31

Multiple Choice

The statement that a portfolio is immunised using duration matching:

• A)means that the FI is entirely hedged against interest rate risks
• B)is misleading as duration matching is a dynamic process and only hedges the FI against instantaneous interest rate changes
• C)is misleading as duration matching is a dynamic process and only hedges the FI against interest rate changes that occur within a month
• D)None of the listed options are correct.

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Definitions:

Domestic Policies

Government strategies and decisions primarily concerned with activities within a country's borders, such as social welfare, education, and healthcare.

Commerce Clause

A provision in the U.S. Constitution granting Congress the power to regulate trade between states, foreign nations, and Indian tribes.

Article I

Article I is the first section of the United States Constitution, establishing the legislative branch of the government, specifying the powers and structure of Congress.

Fourteenth Amendment

The Fourteenth Amendment to the U.S. Constitution grants citizenship to all persons born or naturalized in the U.S. and ensures equal protection under the law.