LDI Meaning and
Definition
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LDI stands for Liability-Driven Investment. It is an investment strategy aimed at managing and matching the assets and liabilities of an individual or entity. LDI is primarily used by pension funds and insurance companies to ensure that their investment portfolio is aligned with their future obligations or liabilities.
The main objective of LDI is to mitigate the risk associated with the fluctuations in interest rates and inflation. By analyzing and projecting the expected future liabilities, an LDI strategy helps to determine the appropriate investment mix and duration of assets to minimize the funding gap. LDI typically involves investing in fixed-income securities such as bonds and derivatives that provide cash flows that closely match the timing and duration of the expected liabilities.
LDI requires rigorous risk management and monitoring to maintain the desired balance between assets and liabilities. This involves ongoing evaluation of the investment portfolio and making adjustments to ensure it remains in line with the changing liabilities and market conditions. LDI strategies may also incorporate hedging techniques such as interest rate swaps or inflation-linked securities to further manage risk.
Overall, LDI serves as a risk management tool that enables pension funds and insurance companies to more effectively meet their future payment obligations by better aligning their investments with their liabilities.
Common Misspellings for LDI
- ldfi
- lrdi
- ldri
- ldui
- ldiu
- ldji
- ldij
- ldki
- ldik
- ldoi
- ld9i
- ldi9
- ld8i
- ldi8
- lldi
- lddi
- l di
- ld i
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