REDINGTON IMMUNIZATION THEORY APPROACH TO HEDGING INTEREST RATE RISK IN INSURANCE COMPANIES IN NIGERIA
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Date
2013-10
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Abstract
Unstable interest rates due to unstable government policies, inflations or actions of the apex bank has contributed to the inability of insurance companies in Nigeria to meet their obligations, in forms of benefits, claims or assurances as at when due, as accounted for by THE low development in the sector. By adopting
Tzeng, Wang and Soo’s linear programming model1, developed from Redington’s classical immunization strategy and using data from the balance sheet of insurance companies in Nigeria, this research work shows how an insurance company’s assets can be immune against interest rate risk. It further reveals that the
multiplier-effects of the solution to this problem on the insurance sector and the Nigerian economy at large cannot be over-emphasized.
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Keywords
Convexity, Duration, Immunization, Linear-programming, Stochastic
Citation
Afolabi T. S. (2013). Redington Immunization Theory Approach to Hedging Interest Rate Risk in Insurance Companies in Nigeria. International Journal of Research in Commerce & Management. 4(10), 130-135