The purpose of this article is to review recent thinking an the question, how to immunize. Although it will largely pass over the prior issue of why and when to immunize. It is worth emphasising at the outset that merely because a firm has the opportunity to hedge a particular risk. It is not necessary in the interest of the firm’s share holder to do so. It should also be pointed out that even if a company decides not to immunize, the concept of duration is potentially useful since it allows management to calculate the extent of its exposure to interest rate risk. In short duration and immunisation have a role to play in measuring and controlling the effects of changes in interest rates. Broadly speaking there are two basic ways of viewing the process by which investors establish the values of companies.
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