Cushion spread

[seemorr]

Realizing I don’t understand this as well as I thought I did.
Dollar safety margin = Asset - PV of liability discounted at risk-free rate
Cushion spread = Target immunized return - return at which asset exactly meets liability
Right?

 

[goodman2011]

wrong minimum required return

 

[seemorr]

Would the minimum required return differ from the return at which the asset meets the liability?

 

[goodman2011]

Dollar safety margin = Asset - PV of liability discounted at market rate
Cushion spread = current available rate - minimum required return

 

[seemorr]

Right thanks, OK, but what I mean is, wouldn’t minimum required return = (FV of liability/PV of asset)?

 

[Thisisit_2011]

So if our portoflio is doing better than Liability (we have cushion) so we can take some risk (active management) but as soon we hit min return then go back to immunization…