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Cash flow matching |
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Cash flow matchingAlso called dedicating a portfolio, this is an alternative to multiperiod immunization that calls for the manager to match the maturity of each element in the liability stream, working backward from the last liability to assure all required cash flows.Cash flow matching Similar MatchesExact matchingExact matchingA bond portfolio management strategy that involves finding the lowest cost portfolio generating cash inflows exactly equal to cash outflows that are being financed by investment. Duration matching strategyDuration matching strategyAn immunization technique that matches immunization duration with the duration of the liabilities. Symmetric cash matchingSymmetric cash matchingAn extension of cash flow matching that allows for the short-term borrowing of funds to satisfy a liability prior to the liability due date, reducing the cost of funding liabilities. Combination matchingCombination matchingAlso called horizon-matching, a variation of multiperiod immunization and cash flow-matching in which a portfolio is created that is always duration-matched and also cash-matched in the first few years. Horizon matching strategyHorizon matching strategyAn income immunization strategy that cash-matches over the next few years and duration-matches the rest. |
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