Immunisation
Selecting bonds so that portfolio duration matches the date the money is needed: losses on revaluation and gains on reinvestment cancel each other out.
How to read the number
The construction rests on the fact that the two effects of a rate change point in opposite directions and balance when duration equals the horizon.
When the metric lies
The equality does not last: portfolio duration falls more slowly than time passes, so the structure has to be rebuilt, and every rebuild costs commission.
Also known as: duration matching