NO.PZ202209060200004705
问题如下：
Rumson Shrewsbury and Sandy Silver are field consultants with Fair Haven Advisers, LLC, an investment consultant firm specializing in fixed-income investing. They plan to expand their practice to focus on such clients as retirement schemes, insurance companies, and others that require solutions to meet liability streams. They meet to discuss Fair Haven’s approach to this new business segment, and Shrewsbury makes the following points to Silver.
Point 1: Life-insurance companies and defined benefit (DB) pension schemes both use liability-driven investing (LDI), which is a special form of asset–liability management (ALM). In both cases, the liabilities are defined and assets are managed in a way that considers the profile and characteristics of the liability.
Point 2: Asset-driven liabilities (ADLs), like LDI, are special cases of ALM. Financing companies accumulate assets as a result of their underlying business. They use ADLs to structure their assets in a way that matches the maturities of the liabilities.
Point 3: An LDI strategy requires estimating the amount and timing of cash outlays in order to estimate the interest rate sensitivity of the liabilities.
Silver tells Shrewsbury, “Managing fixed-income portfolios to meet obligations requires an understanding of the nature of the liabilities. Clients with liability types such as those listed in Exhibit 1 use yield statistics, such as Macaulay, modified duration, money durations, and the present value of a basis point (PVBP), when implementing immunization strategies.”
Exhibit 1 Classification of Liabilities
Shrewsbury responds, “Only Type I clients can measure the interest rate sensitivity of liabilities using yield statistics. Those with Type II, III, and IV liabilities must use a curve duration statistic, such as effective duration, to estimate interest rate sensitivity.”
Silver and Shrewsbury begin discussing a client that sponsors a US DB plan. The client wants to immunize the liabilities such that changes in interest rates under various scenarios will not cause a deterioration in funded status. Key data for the plan assets and liabilities are provided in Exhibit 2. Silver’s forecast is that interest rates will rise in a non-parallel fashion. In fact, he expects a bear steepening of the curve as inflation accelerates because of rising wages.
Exhibit 2 Defined Benefit Plan Characteristics
*Projected benefit obligation.
Silver and Shrewsbury continue their discussion regarding hedging the economic and market risks for a DB plan. Shrewsbury explains that any hedging program can fall short of its objective owing to a number of risks. Silver believes they can use various instruments to hedge interest rate risk but that certain risks can be more difficult to address. He tells Silver, “One risk you face in hedging the liabilities is that the yield of high-quality bonds is used in the discounting process, whereas most investment solutions use a more diversified and lower-quality portfolio of corporate bonds. Conversely, you can face the opposite problem, if you use Treasury futures or interest rate swaps to hedge the liabilities.”
Silver considers alternatives to a cash bond portfolio for hedging the liabilities because he is concerned that as time passes and market conditions change, the initially established hedging program may drift from target levels. Some of his clients with DB plans are underfunded and have interest rate hedge ratios well below 100%. These clients expect rates to rise, and should their view prove correct, the duration gap will improve funded status. He believes these clients should at least consider a costless derivative position to protect from rates falling further if their view is incorrect while also increasing the hedge ratio if rates rise.
Shrewsbury knows that some of his clients do not favor active portfolio management strategies, particularly given their higher fee structures relative to passive strategies. He evaluates alternate ways to establish passive bond market exposure. His preference is to select an instrument that hedges not only the interest rate component of the liability’s discount rate but also the credit component. The obligation should reference a corporate bond index but be structured as a synthetic secured financing transaction.
Question
What contingent strategies would Shrewsbury’s DB clients most likely enter into under the scenario he outlines?
选项：
A.Short a receiver swap B.Long a payer swaption, short a receiver swaption C.Long a receiver swaption, short a payer swaption解释：
SolutionC is correct. The plan is not fully funded and is also not fully hedged; that is, the money durations of the assets and liabilities are not matched. If the clients’ view is incorrect and rates fall further, the mismatch will result in the liabilities increasing in value while the assets will appreciate by a lesser amount. Swaptions are a contingent security on interest rate swaps. A receiver swaption would allow the plan to receive a fixed (higher) rate if rates rally, but at the cost of the swaption premium. To finance this receiver swaption, the DB plan can sell a payer swaption to collect a premium that finances the receiver swaption. If rates rise above some level, the plan would increase its duration by virtue of being put a swap. The plan may have anticipated closing the duration gap at higher interest rate levels, so being put a swap is in line with an LDI program.
A is incorrect because a receiver swap is not a contingent security.
B is incorrect because it is the reverse of the correct solution—long a receiver swaption, short a payer swaption.
He believes these clients should at least consider a costless derivative position to protect from rates falling further if their view is incorrect while also increasing the hedge ratio if rates rise.
