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Suppose you want to immunize a liability at time D with two bonds of Macaulay durations D1 and D2, respectively. Show that the fraction 1
Suppose you want to immunize a liability at time D with two bonds of Macaulay durations D1 and D2, respectively. Show that the fraction 1 and 2 of the two bonds in the initial portfolio need to satisfy
1 + 2 = 1 , 1 D1 + 2 D2 = D .
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