[Verse 1] Sarah's got a pension fund, payments due in ten long years Interest rates keep changing, filling her with countless fears When rates go up her bonds drop down, when rates fall bonds rise high She needs a way to match the risk and keep her portfolio dry [Chorus] Duration matching, immunization Shield your portfolio from rate fluctuation Match the duration of assets to your liability's time Duration matching, immunization Protect your future obligation When durations align, your risk declines every time [Verse 2] Duration measures sensitivity to interest rate moves It's like a weighted average of when your cash flows come through If liability duration is eight and your bonds are eight too Then rate changes affect them both in ways that are true [Chorus] Duration matching, immunization Shield your portfolio from rate fluctuation Match the duration of assets to your liability's time Duration matching, immunization Protect your future obligation When durations align, your risk declines every time [Bridge] When rates rise and bond prices fall Your assets and liabilities drop and that's all When rates drop and bond prices climb Both sides move up at the same time Perfect balance, perfect hedge Keep your promises right on the edge [Verse 3] Monitor and rebalance as time passes by Duration drifts naturally, don't let it slide Cash flows and yield changes mean you must adjust Keep those durations matched, it's really a must [Chorus] Duration matching, immunization Shield your portfolio from rate fluctuation Match the duration of assets to your liability's time Duration matching, immunization Protect your future obligation When durations align, your risk declines every time [Outro] Sarah's fund is safe now, her future payments secured Duration matching strategy has her interest risk cured Match your durations well, and you'll sleep sound at night Immunization strategy keeps your portfolio right
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