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Investment: An A-Z Guide by Philip Ryland

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I

IFRS

See INTERNATIONAL FINANCIAL REPORTING STANDARDS.

Immunisation

The investment strategy for protecting a BOND portfolio against the risk of rising interest rates. Theoretically, this is possible because of the twin effects of rising rates. They depress the price of bonds, but they raise yields, therefore allowing future income to be reinvested at higher rates than previously expected. A bond portfolio would be immunised if its DURATION equalled the investor’s expected investment period. However, this is more theoretical than real because the portfolio would have to be continually rebalanced so that its duration matched the investment period.

In the money

Assume we are dealing with a CALL OPTION, which gives the holder ...

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