CP 351: A duration match does not guarantee a liquidity match
Market sensitivity and the ability to meet cash obligations are different ALM questions. A portfolio can match duration while its cash flows arrive after the liabilities that must be paid.
Original practice scenario
In an original portfolio, asset and liability duration both equal 8, but large benefit payments are due next quarter and asset maturities are distant. Prepare a cash-gap table and a stress on liquid-asset sale values. Explain the missing liquidity risk without dismissing the duration match.
Study check
Write the assumptions, the decision being supported and one limitation. Use the current course syllabus for the required terminology and scope; this introductory guide is not a complete course summary.
Reading sources
ActNet editorial guide · October 1, 2026 · Original illustrative examples.