Valuation of pension fund liabilities in incomplete markets

Research output: Contribution to journalArticleScientificpeer-review

Abstract

This paper discusses the valuation of wage-indexed pension liabilities. Valuation of these contingent claims by replication is typically not possible as the wage index cannot be hedged perfectly with financial market instruments. 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.
Original languageEnglish
Pages (from-to)277-294
JournalJournal of Pension Economics and Finance
Volume7
Issue number3
Publication statusPublished - 2008

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Liability
Pension funds
Incomplete markets
Wages
Replication
Financial markets
Discount factor
Contingent claims
Pensions

Cite this

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title = "Valuation of pension fund liabilities in incomplete markets",
abstract = "This paper discusses the valuation of wage-indexed pension liabilities. Valuation of these contingent claims by replication is typically not possible as the wage index cannot be hedged perfectly with financial market instruments. 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.",
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}

Valuation of pension fund liabilities in incomplete markets. / de Jong, F.C.J.M.

In: Journal of Pension Economics and Finance, Vol. 7, No. 3, 2008, p. 277-294.

Research output: Contribution to journalArticleScientificpeer-review

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