Immunization

Filed Under » , , , ,
Dictionary Says

Definition of 'Immunization'

A strategy that matches the durations of assets and liabilities thereby minimizing the impact of interest rates on the net worth.

Also known as "multiperiod immunization".
Investopedia Says

Investopedia explains 'Immunization'

For example, large banks must protect their current net worth, whereas pension funds have the obligation of payments after a number of years. These institutions are both concerned about protecting the future value of their portfolios and therefore have the problem of dealing with uncertain future interest rates. By using an immunization technique, large institutions can protect (immunize) their firm from exposure to interest rate fluctuations. A perfect immunization strategy establishes a virtually zero-risk profile in which interest rate movements have no impact on the value of a firm.

Articles Of Interest

  1.

    The Advantages Of Bonds

    Bonds contribute an element of stability to almost any portfolio and offer a safe and conservative investment.

  2. Top 4 Strategies For Managing A Bond Portfolio

    Find out how these strategies work and how you can put them to work for you.

  3. Immunization Inoculates Against Interest Rate Risk

    Big-money investors can hedge against bond portfolio losses caused by rate fluctuations.

  4. Which Order To Use? Stop-Loss Or Stop-Limit Orders

    Stop-loss and stop-limit orders can provide different types of protection for investors seeking to lock in profits or limit losses. Investors need to know how each type of order works to know ...

  5. Introduction To Treasury Inflation-Protected Securities (TIPS)

    If you want to protect your portfolio from inflation, all you need are a few TIPS.

  6. Interest Rates: Nominal and Real

    An interest rate is the cost of borrowing money, expressed as a percentage of the loan amount. Interest rates are the primary yardstick for measuring how much return lenders will get. However, ...

  7. 6 Asset Allocation Strategies That Work

    Your portfolio's asset mix is a key factor in whether it's profitable. Find out how to get this delicate balance right.

  8. A Top-Down Approach To Investing

    Use a global view to determine which stocks belong in your portfolio.

  9. How Risk Free Is The Risk-Free Rate Of Return?

    This rate is rarely questioned - unless the economy falls into disarray.

  10. Managing Interest Rate Risk

    Learn which tools you need to manage the risk that comes with changing rates.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Network Effect

    A phenomenon whereby a good or service becomes more valuable when more people use it. The internet is a good example...

  2. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...

  3. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.

  4. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.

  5. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.

  6. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...
Trading Center