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Contingent immunization provides an effective method of protecting the active bond management from adverse market movements and to help the bond portfolio achieve a minimum return. This article mainly discusses the system of using contingent immunization and the risk control process involved. Contingent immunization is a combination of active management and an immunization. It is different from classical immunization, which tends to get a maximum fixed return, normally the prevailing rate. Immunization can prevent the bond portfolio being affected by the downward change of market rate, but in a predefined manner.. However, contingent immunization incorporates the concepts of cushion spread and safety margin to make the management of portfolio more flexible.
Approximate Word count = 392
Approximate Pages = 1.6
(250 words per page double spaced)
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