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Pricing Risk In Corporate Pension Plans
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Book Synopsis Pricing Risk in Corporate Pension Plans by : Roy P. M. M. Hoevenaars
Download or read book Pricing Risk in Corporate Pension Plans written by Roy P. M. M. Hoevenaars and published by . This book was released on 2009 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: New accounting rules and increased scarcity of risk capital have led to growing pressure on corporations to shift pension plan risk from employers to participants. This implies a shift from Defined Benefit (DB) plans to a variety of collective and individual Defined Contributions (DC) plans. Most of these shifts have been ad-hoc and not based on clear and objective criteria. This article shows how negotiations could be clarified by using modern option pricing and financing techniques. Both the value of the guarantees regarding accrued pension rights, as well as future rights to be accrued, can be objectively determined. For example, the authors show that a shift from a typical DB to a collective DC plan should cost the employer a lump sum payment of twelve percent of the accrued pension obligations and an increase in the contribution rate at four percent of pay.
Book Synopsis Pension Fund Risk Management by : Marco Micocci
Download or read book Pension Fund Risk Management written by Marco Micocci and published by CRC Press. This book was released on 2010-01-25 with total page 766 pages. Available in PDF, EPUB and Kindle. Book excerpt: As pension fund systems decrease and dependency ratios increase, risk management is becoming more complex in public and private pension plans. Pension Fund Risk Management: Financial and Actuarial Modeling sheds new light on the current state of pension fund risk management and provides new technical tools for addressing pension risk from an integr
Book Synopsis Restructuring Retirement Risks by : David Blitzstein
Download or read book Restructuring Retirement Risks written by David Blitzstein and published by OUP Oxford. This book was released on 2006-08-03 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book posits that retirement security is the central policy concern of our time. A generation of 'Baby Boomers' is on the verge of retirement, yet pension systems confront crushing challenges, and governments often appear confused about which direction they should move in. Contributors to this volume clarify the discussion by addressing the question: 'What are the new risks and rewards in pensions, and what paths can stakeholders chose to solve these problems?'. The chapters set their sights on employees' needs and expectations, employers' intentions and realizations, and policymakers' efforts to resolve the many challenges. Despite the fact that retirement systems face deep stresses exacerbated by volatile capital markets, poor corporate earning streams, weak macroeconomic performance, and international turmoil, nevertheless, contributors in this volume show courage and creativity in plotting the course over uneven terrain. In the book, three aspects of the evolution of risk and reward-sharing in retirement are evaluated, to offer guidance to pension fiduciaries, plan participants, and policymakers. First, it formulates new perspectives for assessing retirement risks and rewards. Second, it evaluates efforts to insure retirement plans. Third, it proposes several new strategies for managing retirement system risk. The volume represents an invaluable addition to the Pension Research Council/Oxford University Press series. It will be especially useful for managers working toward more efficient pension plans; to scholars and policymakers seeking to maximize pension design effectiveness; and to actuaries and tax specialists concerned with pension regulation. The Pension Research Council at the Wharton School of the University of Pennsylvania was founded 50 years ago to encourage research and teaching on pensions and retirement security. Council projects address the long-term issues that underlie contemporary concerns and seek to broaden public understanding of these complex arrangements through research into their social, economic, legal, actuarial, and financial foundations of privately and publicly-provided benefits.
Book Synopsis The Investment Performance of Corporate Pension Plans by : Steven A. Berkowitz
Download or read book The Investment Performance of Corporate Pension Plans written by Steven A. Berkowitz and published by Praeger. This book was released on 1988-02-22 with total page 160 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines whether pension plans achieved satisfactory investment results when compared to conventional market indexes. It also covers the impact of factors such as risk, turnover and investment allocation policy on performance. . . . Pension plan managers and accountants who audit or advise them will be most interested in obtaining this book, as will academics doing research on pension plan performance. Journal of Accountancy The authors argue that the principle causes of the poor performance record of pension plan investments are frequent portfolio reallocations and high turnover. They show that these twin strategies act more to incur unnecessary costs than to enhance profits. They proceed to develop a new concept for pension fund diversification, one that will achieve the goals the present strategies have failed to achieve. Must reading for pension fund executives, corporate money managers, and bank trust officers, this book is also a significant addition to the finance and investing curriculum.
Book Synopsis Managing Pension and Retirement Plans by : August J. Baker
Download or read book Managing Pension and Retirement Plans written by August J. Baker and published by Oxford University Press. This book was released on 2004-10-28 with total page 368 pages. Available in PDF, EPUB and Kindle. Book excerpt: As the U.S. Population ages, retirement is becoming an increasingly important life stage. Pension and retirement plans are crucial to the financial well-being of older citizens and key determinants of their standard of living. Many varieties of pension plans are currently offered, and employers have an interest in these plans because a good pension plan can help an employer attract, retain, and motivate a competent workforce. In some cases, the employer's financial health can depend significantly on the financial health of its pension plan. When employers make decisions regarding pension and retirement plans, they are making decisions that have high stakes for both their employees and the employer itself. Poor decisions can lead to intense scrutiny, sometimes by the media or in the courtroom. Good pension decision making can provide a secure future for the employer and its employees. Managing Pension and Retirement Plans: A Guide for Employers, Administrators and Other Fiduciaries covers the essential financial issues surrounding pension plans. It discusses investment policy and strategy, performance measurement, fiduciary responsibilities, and labor market issues, among other topics. Anyone responsible for any aspect of pension plan management will profit from reading this book.
Book Synopsis Financial Aspects of the United States Pension System by : Zvi Bodie
Download or read book Financial Aspects of the United States Pension System written by Zvi Bodie and published by University of Chicago Press. This book was released on 2008-04-15 with total page 466 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides valuable information and analysis to managers, policymakers, and investment counselors in the rapidly expanding field of pension funding. American workers, too, need answers and insights on how to invest their money and plan for their retirement. fifteen of America's leading financial analysts address such pressing questions as -What is the current financial status of the elderly, and how vulnerable are they to inflation? -What is the impact of inflation on the private pension system, and what are the effects of alternative indexing schemes? -What roles can the social security system play in the provision of retirement income? -What is the effect of the tax code and the Employee Retirement Income Security Act of 1974 (ERISA) on corporate pension policy? -How well funded are corporate pension plans, and is a firm's unfunded pension liability fully reflected in the market value of its common stock? Many of the conclusions these experts reach contradict and challenge popular views, thus providing fertile ground for innovation in pension planning.
Book Synopsis Do a Firm's Equity Returns Reflect the Risk of Its Pension Plans? by : Li Jin
Download or read book Do a Firm's Equity Returns Reflect the Risk of Its Pension Plans? written by Li Jin and published by . This book was released on 2004 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the empirical question of whether systematic equity risk of U.S. firms as measured by beta from the Capital Asset Pricing Model reflects the risk of their pension plans. There are a number of reasons to suspect that it might not. Chief among them is the opaque set of accounting rules used to report pension assets, liabilities, and expenses. Pension plan assets and liabilities are off-balance sheet, and are often viewed as segregated from the rest of the firm, with its own trustees. Pension accounting rules are complicated. Furthermore, the role of Pension Benefit Guaranty Corporation further clouds the real relation between pension plan risk and firm equity risk. The empirical findings in this paper are consistent with the hypothesis that equity risk does reflect the risk of the firm's pension plan despite arcane accounting rules for pensions. This finding is consistent with informational efficiency of the capital markets. It also has implications for corporate finance practice in the determination of the cost of capital for capital budgeting. Standard procedure uses de-leveraged equity return betas to infer the cost of capital for operating assets. But the de-leveraged betas are not adjusted for the risk of the pension assets and liabilities. Failure to make this adjustment will typically bias upwards estimates of the discount rate for capital budgeting. The magnitude of the bias is shown here to be large for a number of well-known U.S. companies. This bias can result in positive net-present-value projects being rejected.
Book Synopsis Issues in Pension Economics by : Zvi Bodie
Download or read book Issues in Pension Economics written by Zvi Bodie and published by University of Chicago Press. This book was released on 2007-12-01 with total page 390 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the past several decades, pension plans have become one of the most significant institutional influences on labor and financial markets in the U.S. In an effort to understand the economic effects of this growth, the National Bureau of Economic Research embarked on a major research project in 1980. Issues in Pension Economics, the third in a series of four projected volumes to result from thsi study, covers a broad range of pension issues and utilizes new and richer data sources than have been previously available. The papers in this volume cover such issues as the interaction of pension-funding decisions and corporate finances; the role of pensions in providing adequate and secure retirement income, including the integration of pension plans with social security and significant drops in the U.S. saving rate; and the incentive effects of pension plans on labor market behavior and the implications of plans on labor market behavior and the implications of plans for different demographic groups. Issues in Pension Economics offers important empirical studies and makes valuable theoretical contributions to current thinking in an area that will most likely continue to be a source of controversy and debate for some time to come. The volume should prove useful to academics and policymakers, as well as to members of the business and labor communities.
Book Synopsis Managerial Risk Taking Incentives and Corporate Pension Policy by : Divya Anantharaman
Download or read book Managerial Risk Taking Incentives and Corporate Pension Policy written by Divya Anantharaman and published by . This book was released on 2013 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: Theory predicts that stockholders of firms with defined-benefit pension plans will engage in risk-shifting by underfunding plans and investing plan assets in risky securities, as their firms approach distress. The empirical evidence so far has, however, been consistent more with risk-management than risk-shifting. We test whether the compensation incentives of top management affect the extent of risk-shifting versus risk-management behavior in pension plans. We find that risk-shifting through pension underfunding is stronger with compensation structures that create high wealth-risk sensitivity (vega), and weaker with high wealth-price sensitivity (delta). These relationships hold across firms and within firms and managers over time. We find consistent but weaker results with risk-shifting through pension asset allocation to risky securities. While both CEO and CFO incentives affect pension strategy, CFO incentives dominate, suggesting that pension decisions fall within the CFO's domain. We find also that risk-shifting through pension underfunding is lower when CFOs' own pensions are larger. Overall, these findings show that top managers' compensation structure is an important driver of corporate pension policy; they also highlight firms within which the moral hazard concerns fueled by Pension Benefit Guaranty Corporation insurance are most relevant.
Book Synopsis Risk Management for Pension Funds by : Francesco Menoncin
Download or read book Risk Management for Pension Funds written by Francesco Menoncin and published by Springer Nature. This book was released on 2021-02-09 with total page 239 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents a consistent and complete framework for studying the risk management of a pension fund. It gives the reader the opportunity to understand, replicate and widen the analysis. To this aim, the book provides all the tools for computing the optimal asset allocation in a dynamic framework where the financial horizon is stochastic (longevity risk) and the investor's wealth is not self-financed. This tutorial enables the reader to replicate all the results presented. The R codes are provided alongside the presentation of the theoretical framework. The book explains and discusses the problem of hedging longevity risk even in an incomplete market, though strong theoretical results about an incomplete framework are still lacking and the problem is still being discussed in most recent literature.
Download or read book Pension Insurance Data Book written by and published by . This book was released on 2002 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Pension Finance by : M. Barton Waring
Download or read book Pension Finance written by M. Barton Waring and published by John Wiley & Sons. This book was released on 2011-09-13 with total page 336 pages. Available in PDF, EPUB and Kindle. Book excerpt: Pension plans around the world are in a state of crisis. U.S. plans alone are facing a total accrued liability funding deficit of almost $4 trillion (of the same order of magnitude as the federal debt), a potential financial catastrophe that ranks among the largest ever seen. It has become clear that many government, corporate, and multi-employer pension sponsors will not be able to cope with this crippling debt and may default on promised benefits. And many of those sponsors that might be able to cope are exasperated by continuous, ongoing negative surprises-large unexpected deficits and higher-than-expected required contributions and pension expense-and are choosing to terminate their plans. But it need not be so. Pension Finance: Putting the Risks and Costs of Defined Benefit Plans Back under Your Control walks the reader through the conventional actuarial and accounting approaches to financing pension benefits and investing plan assets, showing that the problems described happen as a natural consequence of the dated methods still in use. It shows in detail how modern methods based on market value will easily minimize these risks: Pension plans can in fact be comfortable for employers to sponsor and safe for employees to contribute todepend on for their retirement needs. This book is must-read for defined benefit pension plan sponsors and employee representatives, plan executives, board members, accountants, fund managers, consultants, and regulators., Research sponsored by the CFA Institute, this book demystifies pension finance, previously accessible only to actuaries. It teaches the topic in lay terms by drawing complete analogies to ordinary transactions such as paying off a mortgage or saving for college. Armed with this book, anyone comfortable with finance and investments in any other context can be comfortable with pension finance and pension investment policy. And further armed with a handheld financial calculator, any layperson can quickly estimate the contributions needed to keep a given plan comfortably solvent, giving them a powerful tool for oversight.
Book Synopsis Accountants' Handbook, Volume 1 by : D. R. Carmichael
Download or read book Accountants' Handbook, Volume 1 written by D. R. Carmichael and published by John Wiley & Sons. This book was released on 2007-06-04 with total page 1057 pages. Available in PDF, EPUB and Kindle. Book excerpt: This highly regarded reference is relied on by a considerable part of the accounting profession in their day-to-day work. This handbook is the first place many accountants look to find answers to practice questions. Its comprehensive scope is widely recognized and relied on. It is designed as a single reference source that provides answers to all reasonable questions on accounting and financial reporting asked by accountants, auditors, bankers, lawyers, financial analysts, and other preparers and users of accounting information.
Book Synopsis Managing Corporate Pension Plans by : Dennis E. Logue
Download or read book Managing Corporate Pension Plans written by Dennis E. Logue and published by A E I Press. This book was released on 1984 with total page 88 pages. Available in PDF, EPUB and Kindle. Book excerpt: Evaluation study of the financial management of enterprise level pension funds during the 1970s inflation in the USA - discusses investment returns from shares, real estate and commoditys; concludes that stable, balanced investments fared better than attempts to forecast financial market trends. References and tables.
Book Synopsis Pension Funding Policy and Corporate Finance by : Man-Bing Sze
Download or read book Pension Funding Policy and Corporate Finance written by Man-Bing Sze and published by . This book was released on 1985 with total page 124 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Restructuring Retirement Risks by : David Blitzstein
Download or read book Restructuring Retirement Risks written by David Blitzstein and published by Oxford University Press, USA. This book was released on 2006-08-03 with total page 270 pages. Available in PDF, EPUB and Kindle. Book excerpt: Highlighting retirement security as a major policy concern, this book addresses the question 'What are the risks & rewards in pensions, & what paths can stakeholders chose to solve these problems?'. It deals with employees' needs & expectations, employers' intentions & realizations, & policymakers' efforts to resolve the many challenges.
Book Synopsis The Influence of Defined Benefit Plans on Equity Risks and Prices by : Kunal Rawal
Download or read book The Influence of Defined Benefit Plans on Equity Risks and Prices written by Kunal Rawal and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines whether the systematic equity risk of German companies, measured by beta from Capital Asset Pricing Model (CAPM), reflects the risk of defined benefit pension plans sponsored by the companies. The possible reasons why pension risk does not get incorporated into company valuations could be low disclosure norms, off balance sheet reporting of pension liabilities and opaque set of accounting rules that govern these issues. In the aftermath of an era of low interest rates and declining returns on equity markets, the pension plans deficit have soared due to increase in liability on one hand and lower valuation of pension assets on the other. Pension plan deficits can be detrimental to company's financial health thereby, impacting its equity valuation and credit ratings, jeopardizing its very existence. This paper also highlights the implication of pension plan on capital budgeting decision making process. As it turns out, ignoring the value as well as risk of pension plans can push up the cost of capital which feeds into discount rates used to estimate projects net present value. This paper advices on the changes that need to be made to standard procedure of WACC calculation to accommodate pension plan and take an integrated approach towards corporate finance decision making process. The empirical finding also highlights the direct relationship between firm risk and pension risk, although the results were curtailed due to unavailability of large cross sectional and panel data.
