Determine which of the following statements about immunization strategies are true.

• Redington immunization protects against any change in interest rates.
• Full immunization occurs only when the duration of the assets is greater than the duration of the liabilities.
• Immunization techniques strive to arrange the asset portfolio such that the convexity of the assets is equal to the convexity of the liabilities.

• None
• I and II only
• I and III only
• II and III only
• The correct answer is not given by (A), (B), (C), or (D)

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

Solution: A

I is false as it is true for small parallel changes in interest rates only.

II is false, as the durations will be equal.

III is false as the convexity of assets should be greater than the convexity of liabilities.

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