Determine which of the following statements is false with respect to Redington immunization

• Modified duration may change at different rates for each of the assets and liabilities a time goes by.
• Redington immunization requires infrequent rebalancing to keep modified duration ofassets equal to modified duration of liabilities.
• This technique is designed to work only for small changes in the interest rate.
• The yield curve is assumed to be flat.
• The yield curve shifts in parallel when the interest rate changes.

Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.

Solution: B

All are true except B. Immunization requires frequent rebalancing.

Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.