In the bond portfolio there are multiple options available and each strategy comes with its own tradeoffs. Among various strategy Let us understand what is mean by horizon matching in bond portfolio management

Meaning: It is a combination of the two strategies discussed in the subsections above: cash-matching dedication and immunization. And the liability is divided into two time horizons. The bond portfolio is constructed to provide a cash match for liabilities during the first time horizon and to cover liabilities during the second time horizon by using duration matching i.e. immunization.

Uses of horizon matching in bond portfolio management

For ensuring that the liabilities will be met with certainty during the early years, but allows for more flexibility in the second time horizon of the portfolio.

For eliminating the problem of non-parallel shifts as the short-term liabilities are covered by cash matching

To determining which combination of certainty against flexibility will suit the needs of portfolio the best