hard · FRM Part 2 Risk & Investment Management
A pension plan manager decides to hedge interest rate risk by increasing the liability-asset correlation from 0.35 to 0.80.
If assets (A) are 120 billion and liabilities (L) are 100 billion, with σ_A = 11% and σ_L = 12%, by how much does the surplus volatility decrease?
- 2.10 billion
- 4.55 billion
- 14.40 billion
- $6.35 billion
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