ACTSC445 Lecture Notes - Reinvestment Risk, Actuarial Science, Pension

73 views3 pages

Document Summary

Department of statistics and actuarial science, university of waterloo. Unit 7 dedicated bond portfolio: a case study. In this unit, we use an example based on a pension plan to illustrate the use of a dedicated bond portfolio for cash ow matching. The liabilities in this example are taken to be the expected bene t payouts to a closed block of current retirees, and a 35-year schedule is used. When this is the case, various mortality, termination, and bene t assumptions must be reviewed periodically. The following table is an excerpt of the schedule of expected bene t payouts for this example (exhibit. Once we have the liability schedule, the next step is to identify the portfolio"s constraints. A typical constraint is to force the portfolio to contain only bonds with low credit risk. Also, mortgages are usually undesirable because of the prepayment uncertainty. The following table gives the constraints used for this example (exhibit 48-2 of fabozzi).

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

Related Questions