Pricing Risk In Corporate Pension Plans
DOWNLOAD
Download Pricing Risk In Corporate Pension Plans PDF/ePub or read online books in Mobi eBooks. Click Download or Read Online button to get Pricing Risk In Corporate Pension Plans book now. This website allows unlimited access to, at the time of writing, more than 1.5 million titles, including hundreds of thousands of titles in various foreign languages. If the content not found or just blank you must refresh this page
Pricing Risk In Corporate Pension Plans
DOWNLOAD
Author : Roy P. M. M. Hoevenaars
language : en
Publisher:
Release Date : 2009
Pricing Risk In Corporate Pension Plans written by Roy P. M. M. Hoevenaars and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
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.
Restructuring Retirement Risks
DOWNLOAD
Author : David Blitzstein
language : en
Publisher: OUP Oxford
Release Date : 2006-08-03
Restructuring Retirement Risks written by David Blitzstein and has been published by OUP Oxford this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006-08-03 with Business & Economics categories.
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.
Risk Shifting Versus Risk Management
DOWNLOAD
Author : Joshua Rauh
language : en
Publisher:
Release Date : 2007
Risk Shifting Versus Risk Management written by Joshua Rauh and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Defined benefit pension plans categories.
The asset allocation of defined benefit pension plans is a setting where both risk shifting and risk management incentives are likely be present. Empirically, firms with poorly funded pension plans and weak credit ratings allocate a greater share of pension fund assets to safer securities such as government debt and cash, whereas firms with well-funded pension plans and strong credit ratings invest more heavily in equity. These relations hold both in the cross-section and within firms and plans over time. The incentive to limit costly financial distress plays a considerably larger role than risk shifting in explaining variation in pension fund investment policy among U.S. firms.
The Investment Performance Of Corporate Pension Plans
DOWNLOAD
Author : Steven A. Berkowitz
language : en
Publisher: Praeger
Release Date : 1988-02-22
The Investment Performance Of Corporate Pension Plans written by Steven A. Berkowitz and has been published by Praeger this book supported file pdf, txt, epub, kindle and other format this book has been release on 1988-02-22 with Business & Economics categories.
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.
Pension Fund Risk Management
DOWNLOAD
Author : Marco Micocci
language : en
Publisher: CRC Press
Release Date : 2010-01-25
Pension Fund Risk Management written by Marco Micocci and has been published by CRC Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-01-25 with Business & Economics categories.
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
Risk Shifting Versus Risk Management
DOWNLOAD
Author : Joshua D. Rauh
language : en
Publisher:
Release Date : 2010
Risk Shifting Versus Risk Management written by Joshua D. Rauh and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
The asset allocation of defined benefit pension plans is a setting where both risk shifting and risk management incentives are likely be present. Empirically, firms with poorly funded pension plans and weak credit ratings allocate a greater share of pension fund assets to safer securities such as government debt and cash, whereas firms with well-funded pension plans and strong credit ratings invest more heavily in equity. These relations hold both in the cross-section and within firms and plans over time. The incentive to limit costly financial distress plays a considerably larger role than risk shifting in explaining variation in pension fund investment policy among U.S. firms.
Do A Firm S Equity Returns Reflect The Risk Of Its Pension Plans
DOWNLOAD
Author : Li Jin
language : en
Publisher:
Release Date : 2004
Do A Firm S Equity Returns Reflect The Risk Of Its Pension Plans written by Li Jin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Pension trusts categories.
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.
Studies On The Management Of Corporate Pension Funds And Stock Market Volatility
DOWNLOAD
Author : Young Sun Ghauh
language : en
Publisher:
Release Date : 1992
Studies On The Management Of Corporate Pension Funds And Stock Market Volatility written by Young Sun Ghauh and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1992 with Investments categories.
Managerial Risk Taking Incentives And Corporate Pension Policy
DOWNLOAD
Author : Divya Anantharaman
language : en
Publisher:
Release Date : 2013
Managerial Risk Taking Incentives And Corporate Pension Policy written by Divya Anantharaman and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
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.
The Influence Of Defined Benefit Plans On Equity Risks And Prices
DOWNLOAD
Author : Kunal Rawal
language : en
Publisher:
Release Date : 2014
The Influence Of Defined Benefit Plans On Equity Risks And Prices written by Kunal Rawal and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
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.