Reading 22 Exhibit 7 and Exhibit 8 -- Immunization
I’m trying to understand when immunization is possible.
Exhibit 7 on Page 60 shows how upward steepening/flattening or downward steepining/flattening can lead to the same results as a parallel shift in yield curves. Leads to immunization.
Exhibit 8 is where I’m confused. Do twists always lead to immunization not being achieved or is it only a risk?
For example, Exhibit 8, Part A (upper graph) of exhibit the losses on the long term position exceed the gains on the short term position. Isn’t it possible for this twist to lead to the same change in Market value for panel A on page 60 where it goes down by 11,340,212? And therefore it is immunized with the twist as well?