Valuation of pension liabilities in incomplete markets∗
نویسنده
چکیده
This paper discusses the valuation of wage-indexed pension fund liabilities. Valuation by replication with market instruments is typically not possible as there are no wage-indexed assets. 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 that can be used to calculate the value of wage indexed liabilities. ∗Thanks to Ralph Koijen, Roger Laeven and Antoon Pelsser for useful discussions and comments on earlier versions. Correspondence address: Department of Finance, Tilburg University, P.O. Box 90153, 5000 LE Tilburg, the Netherlands. E-mail: [email protected].
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