Independent solution

How to solve this Redington Immunization Conditions question

Setup

Setup

Redington immunization at the valuation rate requires equal present values, equal first derivatives or durations, and asset convexity greater than liability convexity.

PVA=PVL,DA=DL,CA>CLPV_A=PV_L,\quad D_A=D_L,\quad C_A>C_L

Model

Model

These are local conditions under a flat yield curve and small parallel shifts. They do not eliminate the need to rebalance as time passes or as cash flows change.

flat curve and parallel small shifts are assumed\text{flat curve and parallel small shifts are assumed}

Compute

Compute

Comparing each statement with those conditions shows that statement B is false; the remaining statements describe required conditions or limitations correctly.

duration drift requires frequent rebalancing\text{duration drift requires frequent rebalancing}

Answer

Answer

The calculation gives the statement identified by the conditions above for redington immunization conditions, matching published choice B.

choice B(B)\boxed{\text{choice B}\quad\text{(B)}}