• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Chapter 28 - developing an investment strategy

S

ST6_aspirant

Member
What is the difference between matching and liability hedging? I can't seem to see any difference between the two.
 
I think that matching relates to cashflows, whereas hedging relates to asset / liability values.

So, for example, it might be the case that the asset and liability values move in line with each other, but that the cashflows are not necessarily matched.

I tend to think of liabilities being perfectly hedged where the assets actually define what the liabilities are, eg DC pension policies and unit-linked products, and would use the concept of hedging when trying to ensure a provider is solvent / funded. I would use matching when trying to ensure that the liability cashflows can be met.

So in practice, I think the two things might be pretty similar, but may apply in different contexts.
 
You must log in or register to reply here.
Back
Top