Tag: Redington immunization

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New Video: Immunization, Part 6

Checking Conditions for (Lack of) Redington Immunization in a Spreadsheet

Spreadsheets are extremely useful tools for many business, academic, and personal applications.

Examples of situations where spreadsheets are useful include: budgeting (totals, averages, piecharts), descriptive statistics (means, standard deviations, correlations, graphs), inferential statistics (t-statistics, p-values, ANOVA regression tables), finance (monthly payments, internal rates of return), simulation (random number generation, discrete … Read the rest

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New Video: Immunization, Part 5

Redington immunization is a concept that can be defined in terms of derivatives of present value functions.

Given asset cashflows A_{0},A_{1},A_{2},\ldots,A_{n} and liability cashflows L_{0},L_{1},L_{2},\ldots,L_{n}, each set of flows occurring at times t=0,1,2,\ldots,n, the expressions P_{A}(i)=\displaystyle\sum_{t=0}^{n}A_{t}(1+i)^{-t} and P_{L}(i)=\displaystyle\sum_{t=0}^{n}L_{t}(1+i)^{-t} represent the present values of these cashflows, as functions of an arbitrary periodic interest rate i.

If we let h(i)=P_{A}(i)-P_{L}(i)=\displaystyle\sum_{t=0}^{n}C_{t}(1+i)^{-t}, where C_{t}=A_{t}-L_{t}, then we say the liabilities are Redington immunized … Read the rest

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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