Valuation of pension liabilities in incomplete markets
AbstractThis paper discusses the valuation of wage-indexed pension fund liabilities. Valuation by replication with market instruments is typically not possible as there are no wage-indexed assets. This paper discusses several methods to find a value in such incomplete markets and advocates utility-based valuation. This approach implies a simple adjustment on the discount factor that can be used to calculate the value of wage indexed liabilities.
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Journal of Pension Economics and Finance.
Volume (Year): 7 (2008)
Issue (Month): 03 (November)
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Other versions of this item:
- Frank de Jong, 2005. "Valuation of pension liabilities in incomplete markets," DNB Working Papers 067, Netherlands Central Bank, Research Department.
- G1 - Financial Economics - - General Financial Markets
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
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