You are facing an obligation with a present value of $100000, duration 8 years, and convexity 24. You want to utilize an immunization strategy for this obligation, which exclusively involves three bonds: A,B and C. You calculated the following information for the three bonds:
|
Bond |
Duration |
Convexity |
|
A |
4 |
16 |
|
B |
12 |
20 |
|
C |
16 |
32 |
- How much money should you invest in each of the bonds with a duration matching immunization strategy?
- How much money should you invest in each three bonds with duration and convexity matched immunization strategy?
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