Zero Replication Immunization

Compared to the buy-and-hold Macaulay duration strategy of bond portfolio immunization, a zero-replication strategy:

Right! A zero-replication strategy involves continually matching the duration of the zero-coupon bond that may be unavailable for purchase (or simply may not exist). This does require rebalancing.

No. Because this strategy closely replicates the values over time of a zero-coupon bond, the resulting immunization of this strategy is better.

Not so. Actually, the buy-and-hold strategy matches duration at the start, making an assumption of parallel yield curve shifts. The zero-replication strategy doesn't require that assumption.

requires rebalancing.

immunizes exactly as well.

assumes only parallel yield curve shifts.