Company: Royal Bank of Scotland (RBS)
Category: Liquidity Risk
Published: 03 February 2011
Insurance companies and pension funds regularly rebalance between credit and duration to manage their asset and liability management (ALM) risks. Since the financial crisis, yields on both credit and duration have fallen. Liquidity premiums, on the other hand, have increased materially – and long-term liquidity should be considered as an independent asset class for both yield enhancement and ALM.