fixedincome: SS9: R23: Q15: Page 60:
why cash flow matching at early year will help to hedge non-parallel shift of yield curve? Thanks.
fixedincome: SS9: R23: Q15: Page 60:
why cash flow matching at early year will help to hedge non-parallel shift of yield curve? Thanks.
According to the text, yield shifts and twists are more common at the short end of the curve than the long end. If you are cash flow matched, you eliminate all yield curve risk. (not just parallel shifts like duration matching).