Advanced Search
MyIDEAS: Login to save this paper or follow this series

Pension Funds and Financial Innovation

Contents:

Author Info

  • Zvi Bodie

Abstract

Pension funds have played a critical role in the evolution of the markets for debt and equity securities and their derivatives in the U.S. over the last 15 years. The new securities and markets can largely be explained as responses to the investment demands of pension funds in an environment of increased interest rate volatility and tighter regulation. Defined benefit pension plans offer annuities that have a guaranteed floor specified by the benefit formula. In order to minimize the cost to the sponsor of providing this guarantee, there is a strong incentive to invest an amount equal to the present value of the accumulated benefit obligation in fixed- income securities with a matching duration. The pursuit of duration matching and related immunization strategies by pension funds has contributed to the emergence and rapid growth of markets for zero coupon bonds, GIC's, CMO's, options, and financial futures contracts. Recent changes in accounting rules (FAS 87) and tax law (OBRA) are likely to reinforce the use of immunization strategies.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w3101.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3101.

as in new window
Length:
Date of creation: Sep 1989
Date of revision:
Publication status: published as Financial Management, Vol. 19, No. 3, pp. 11-22, (Autumn 1990).
Handle: RePEc:nbr:nberwo:3101

Note: ME
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. J. Michael Harrison & William F. Sharpe, 1983. "Optimal Funding and Asset Allocation Rules for Defined-Benefit Pension Plans," NBER Chapters, in: Financial Aspects of the United States Pension System, pages 91-106 National Bureau of Economic Research, Inc.
  2. Jeremy I. Bulow & Randall Morck & Lawrence H. Summers, 1985. "How Does the Market Value Unfunded Pension Liabilities?," NBER Working Papers 1602, National Bureau of Economic Research, Inc.
  3. Petersen, Mitchell A, 1992. "Pension Reversions and Worker-Stockholder Wealth Transfers," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 1033-56, August.
  4. Martin Feldstein, 1981. "Should Private Pensions Be Indexed?," NBER Working Papers 0787, National Bureau of Economic Research, Inc.
  5. Treynor, Jack L, 1977. "The Principles of Corporate Pension Finance," Journal of Finance, American Finance Association, vol. 32(2), pages 627-38, May.
  6. Benjamin M. Friedman, 1983. "Pension Funding, Pension Asset Allocation, and Corporate Finance: Evidence from Individual Company Data," NBER Chapters, in: Financial Aspects of the United States Pension System, pages 107-152 National Bureau of Economic Research, Inc.
  7. Langetieg, T. C. & Findlay, M. C. & da Motta, L. F. J., 1982. "Multiperiod Pension Plans and ERISA," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 17(04), pages 603-631, November.
  8. Ross, Stephen A, 1989. " Institutional Markets, Financial Marketing, and Financial Innovation," Journal of Finance, American Finance Association, vol. 44(3), pages 541-56, July.
  9. Modigliani, Franco. & Cohn, Richard A., 1984. "Inflation and corporate financial management," Working papers 1572-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  10. Bulow, Jeremy I, 1982. "What Are Corporate Pension Liabilities?," The Quarterly Journal of Economics, MIT Press, vol. 97(3), pages 435-52, August.
  11. Sharpe, William F., 1976. "Corporate pension funding policy," Journal of Financial Economics, Elsevier, vol. 3(3), pages 183-193, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Eduardo Walker & Fernando Lefort, 2002. "Pension Reform And Capital Markets: Are There Any (Hard) Links?," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 5(2), pages 77-149.
  2. Thomas Crossley & Mario Jametti, 2008. "Pension Benefit Insurance and Pension Plan Portfolio Choice," Quaderni della facoltà di Scienze economiche dell'Università di Lugano 0809, USI Università della Svizzera italiana.
  3. Vittas, Dimitri & Michelitsch, Roland, 1995. "Pension funds in Central Europe and Russia : their prospects and potential role in corporate governance," Policy Research Working Paper Series 1459, The World Bank.
  4. Vittas, Dimitri, 2000. "Pension reform and capital market development -"feasibility"and"impact"preconditions," Policy Research Working Paper Series 2414, The World Bank.
  5. Warren Tease & Jenny Wilkinson, 1993. "The Provision of Financial Services – Trends, Prospects and Implications," RBA Research Discussion Papers rdp9315, Reserve Bank of Australia.
  6. Vittas, Dimitri, 1998. "Institutional investors and securities markets : which comes first?," Policy Research Working Paper Series 2032, The World Bank.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:3101. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.