Valuation of Hybrid Pension Scheme Liabilities under Inflation

In recent years, it is of great interest to evaluate the level liabilities hybrid pension system as mixed schemes are favored by various countries around world. This paper further improves liability assessment method proposed Broeders et al accounting for inflation risk and assuming that measured a price index follows geometric Brownian motion. A simulation-based pricing framework then introduced assess liability. The results show introduction increases total outstanding pensions. Furthermore, negatively correlated with scheme, while volatility positively it.