In the Notes, it says Macauley duration must match, in the qbank, it says money duration must match and the statement about macauley duration must match is false.
Which is correct?
i’m sorry, did I do something to agitate you?
Not in the least.
It’s clearly a contradiction, and the only people who can resolve it are at CFA Institute. They’re the ones who are writing the exams, so theirs is the only opinion that matters.
I e-mail them all the time when I find inconsistencies or ambiguities in the curriculum. I’m awaiting replies on two e-mails at the moment: one about using parentheses instead of a negative sign in morning session answers and one about handling a mismatched FX swap when the amount is being reduced. They’re generally good about answering questions, but only if you ask them.
I would say, to match time horizon, Macaulay Duration must match (from private Wealth management perspective). From an interest rate risk perspective, money duration is relevant, matching or not will depend on how much risk you want to take.
This is from Schweser Notes, not from CFAI curriculum. I will check CFA curriculum first before posting here again.
Looking at the curriculum is a good idea.
For a single liability - You match Mac Duration with the liability horizon.
For multiple liabilities- You match BPV of assets to BPV of liabilities (so Modified duration/effective duration)
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