Illya Gerasymchuk
Entrepreneur / Engineer
this is why duration matching is key for financial institutions this is also the reason why it's generally not a good idea for governments to refinance long-term debt with short-term debt this shortens the duration of both - government liabilities and market's assets
duration matching protects: ➖ liquidity via cashflow modulation, by helping liability cashflows match asset cashflows ➖ solvency via asset and liability value modulation, by reducing asset value loss when yields fall and reducing liability value loss when yields raise