duration Archives - Infinity is Really Big

March 13, 2019March 13, 2019

New Video: Immunization, Part 7

Balancing Cashflows is Good, Prioritization of God in Life is Even Better

My newest video continues my series on financial mathematics for actuarial exam 2/fm preparation (it is Video #175 of that series). It also continues the topic of the latest videos, which is immunization of liability cashflows by asset cashflows.

Furthermore, I continue to make use of a spreadsheet … Read the rest

February 12, 2019February 12, 2019

New Video: Immunization, Part 4

In “New Video: Immunization, Part 3“, I showed that if a liability cashflow is not immunized by an asset cashflow, we might be able to make modifications to change this state of affairs.

In particular, the time of payment of one of the asset amounts could be changed to achieve, at least, Redington immunization. To be even … Read the rest

February 4, 2019February 12, 2019

New Video: Immunization, Part 3

Immunization of a liability cashflow by an asset cashflow can help to cushion a company when interest rates change, but is it always possible?

My most recent video is “Actuarial Exam 2/FM: Liabilities Not Immunized by Assets in Spite of PV and Duration Matching” (Financial Math for Actuarial Exam 2 (FM), Video #171. October 2018 SOA Sample Exam, Problem #127). … Read the rest

January 30, 2019January 31, 2019

New Video: Immunization, Part 1

It is very important for any business, including any insurance company, to be able to meet their financial liability obligations.

A major class of liabilities that insurance companies must plan for are the claims from their customers. For example, if a person buys car insurance, then the insurance company would be obligated to pay for, among other things, some or … Read the rest

January 18, 2019January 28, 2019

New Video: Derivatives of Bond Prices w.r.t. Parallel Shift in Yield Curve

The series of payments that arises from a coupon bond is an example of a cashflow that can be assigned a “duration“.

A coupon bond can be purchased as an investment that pays “coupons”, which are fixed amounts of money, at certain equally-spaced times during the term of the investment, plus a redemption … Read the rest