Liability-driven investment strategy

Liability-driven investment (LDI) is an asset–liability management approach that designs the asset portfolio around the size, timing, and risk profile of known obligations. It is used by defined benefit pension schemes and insurers to reduce funding volatility and to help ensure cash is available when benefits fall due.

LDI techniques include cash-flow matching and duration matching. Schemes may also use interest rate and inflation swaps, gilt repos, and other derivatives to hedge sensitivity to market moves.

This article is issued from Wikipedia. The text is available under Creative Commons Attribution-Share Alike 4.0 unless otherwise noted. Additional terms may apply for the media files.