Portfolio Analysis
?(?)=?+?∙[1−exp{−??}??]+?∙exp{−?/?}U
Using then this term structure model to value DBPF’s assets. The assets are exclusively bonds. You also use the model to value DBPF’s obligations towards its policyholders. Once you have the value of assets and the value of obligations, you compute DBPF’s current funding position. Furthermore, you assess the sensitivity of this position to changes in interest rates using the modified duration.
DETAILED ASSIGNMENT
