This paper defines an approximation to the value of funding ratio put options for pension funds. This option is, by construction, the ideal option to hedge the risk of a funding ratio falling below some required minimum level. It's value can be used for several applications, for example as a...

We investigate inattention on the part of pension plan participants using a novel dataset covering savings in Sweden's Premium Pension System, data that permit direct comparison of the investment behaviors of pension and retail mutual fund investors. Unlike retail mutual fund investors, pension...

Many pension funds have a mismatch between assets and liabilities, taking more risks than securing liabilities implies. This puts fixed claims of retirees at risk. For the cases with and without macro-risk, this paper analyses the implications of this asset-liability mismatch for welfare,...

This paper examines the impact of participants' age distribution on the asset allocation of Dutch pension funds, using a unique data set of pension fund investment plans for 2007. Theory predicts a negative effect of age on (strategic) equity exposures. We observe that pension funds do indeed...

We propose a generational plan for the occupational pension provision in which people from the same generation are pooled in a generational fund. Each fund can set its own policies independently. This plan provides the benefits of differentiation missing in the prevailing collective plan and the...

We jointly test moral hazard and tax benefit hypotheses related to the defined benefit pension plan funding and investment risk-taking decisions by incorporating the pension plan termination probabilities. We hypothesize that sponsors with different plan termination probabilities are dominated...

According to theory, institutional investors face both risk management and risk shifting incentives. This paper assesses the relevance of these conflicting incentives for Dutch pension funds and insurance firms over the period 1995-2009. Using a unique and extended dataset, we observe a...

Regulators often set value-at-risk (VaR) constraints to limit the portfolio risk of institutional investors. For some investors, notably pension funds, the VaR constraint is enforced over a horizon which is significantly shorter than the investment horizon of the investor. Our paper aims to...