Owadally, Iqbal - In: Review of Quantitative Finance and Accounting 43 (2014) 2, pp. 301-331
Pension funding rules and practice contain implicit smoothing and counter-cyclical mechanisms. We set up a stylized model to investigate whether this may give rise to tail risk, in the form of large but rare losses, when pension liabilities are imperfectly but optimally hedged by pension fund...