Interest Rate Markets Quiz 8

1

List four main considerations in establishing a portfolio's benchmark (or 'neutral') assert structure.

(eg. of liabilities)

, credit requirements

requirements

2

In terms of measurement, how could the benchmark asset structure be expressed?

to

3

Passive management techniques

a __________ portfolio is one in which the assets are chosen such that their cash flows exactly match those of the liabilities.

The main emphasis in on matching present value and modified duration rather than actual cash flows.

is commonly used as a mixture of the above approaches where only cash flows which are only known with reasonable certainty to a point are matched.

Historical data shows that fund managers in general, over a number of years, have had difficulty outperforming broad bond indices.

4

acts as a measure of price volatility, which can then be compared to that of the liability structure of performance benchmarks to establish the degree of divergence, and thus the potential for outperformance (or underperformance).

Interest Rate Markets Quiz 9