Bond Immunisation
Definition
What is Bond Immunisation?
A strategy matching assets and liabilities so interest-rate changes have limited effect on the ability to meet a future obligation.
Example in practice
How This Looks in Practice
A pension fundA pool of retirement assets invested on behalf of members or beneficiaries. aligns portfolioThe complete collection of investments owned by an investor or managed under one mandate. durationA measure of a fixed-income portfolio's sensitivity to changes in interest rates. with the timing of benefit payments.
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Related Terms
Maturity Ladder
A portfolio of debt instruments with maturities spread across regular intervals.
Fixed Income StrategiesBarbell Strategy
A bond strategy concentrated in short and long maturities with little exposure in the middle.
Fixed Income StrategiesBullet Strategy
A bond strategy concentrating maturities around one target date.
Portfolio ConstructionPortfolio
The complete collection of investments owned by an investor or managed under one mandate.