Adams states, “Generally when we evaluate similar situations, we will use a passive, as opposed to an active, management strategy for the fixed-income portfolio, which means the risk of measurement error will be greater than asset liquidity risk.”
Is Adams is most likely correct in her assessment of measurement error?
1. Yes
2. No, because passive management would preclude measurement error
C. No, because asset liquidity risk is greater than the risk of measurement error
Solution
A is correct. Measurement error for Asset BPV can arise even in the classic passive immunization strategy for Type I cash flows, which have set amounts and dates. Asset liquidity can become a risk factor in strategies that add active investing to otherwise passive fixed-income portfolios and would not be applicable here.
请问为什么Type I cash flow 会有measurement error？
为什么passive 不会有liquidity risk？如果要replicate index有些bond的liquidity很低 不是会有liquidity risk吗？
