What is DDRA?If we model DRRA as floor + risk portfolio, then more DRRA-like preferences means a higher floor and a more aggressive risk portfolio. So there would be more bonds in the floor and less bonds in the risk portfolio. The bonds in the floor won't be rebalanced. And since there's less bonds in the risk portfolio, the error due to rebalancing there is less of a problem. In the simple case where all bonds are in the floor and the risk portfolio is 100% stocks, there is no rebalancing and so duration matching becomes straightforward.
Would this still hold under DRRA and a well-performing portfolio? Or a portfolio that is expected to outgrow withdrawals? I would think there would be scenarios where you would not expect to buy more bonds, or expect to buy somewhat less than required to stay at 50/50 in the example.
Statistics: Posted by jocdoc — Wed Dec 04, 2024 6:29 am