Valuation of pension fund liabilities in incomplete markets

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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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