Dear all - re Q27 EOC 22 - question talks about a hospital portfolio that is immunized with non callable bonds, and includes contingent claim risk as a risk of funding the hospital’s liability.
I thought contingent claim risk is only relevant for callable bonds(unless they are including prepayment as separate category)?Thanks in advance!
Made a note on that one as well – it’s weird.
Only angle I can see is the emphasis on risk “associated with the liabilities”. If this was the pension, I’d say the risk associated with the liability would be the actuarial and plan insights into the beneficiaries – a lump-sum retirement option could be seen as a contingent claim. I have no idea what that would be for a hospital wing.
Funny. I looked for the question and CPK’s explanation on link above is fascinate. Is this an English grammar test or Greek philosophy?
So this query was raised 5 years ago and then CFA still haven’t edited the question!