Duration Matching

Duration matching is a financial strategy used by investors or institutions to align the interest rate sensitivity of their assets and liabilities. It involves selecting assets (like bonds) with a duration that closely matches the duration of their liabilities (such as future obligations or payments). By doing this, they reduce the risk that interest rate changes will cause the value of their assets and liabilities to diverge, helping to stabilize their financial position and ensure they can meet future commitments regardless of interest rate fluctuations.