Immunizing single liability

CFA Level III
#1

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Which portfolio is best for immunizing a single liab?

I thought its portfolio C as MacD matches exactly.
However, answer is given as PF B as its convexity is lower.

#2

For single liability, other than matching Macaulay Duration, the convexity should be minimized (to minimize structural risk and this is also indicated by the client).

For multiple liabilities, convexity of assets must be greater than the convexity of liabilities (plus all the other requirements like matching money duration/BPV).

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#3

Thanks for sharing your viewpoint.
I understand that convexity should be low, but PF B’s MacD is less than the maturity. Shoudn’t both the conditions be true? Or is it that 0.01 difference in MacD not material?

#4

It still rounds to 15. So that 0.01 difference is not material. If they give B’s MacDur as 14.50 then it’s a clear answer for Portfolio C.

#5

Awesome. Got it. Thanks a ton.

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