In defined contribution (DC) pension schemes, the regulator usually imposes asset allocation constraints (minimum and maximum limits by asset class) in order to create funds with different risk-return profiles. In this article we challenge this approach and show that such funds exhibit erratic...

This paper develops a general continuous-time framework for defining the optimal corporate pension policy for defined benefit (DB) plans in the presence of PBGC insurance. Interactions between the firm's optimal investment and financing policies and the optimal portfolio strategy for DB plans...

In measuring its Operational Risk VaR, a bank needs to pay attention when including external data in its internal loss collection. In principle, these data should be scaled consistently to the specific nature of the bank's risk, but this is not done by the majority of institutions with advanced...

Companies that freeze defined benefit pension plans save the equivalent of 13.5 percent of the long-horizon payroll of current employees. Furthermore, firms with higher prospective accruals are more likely to freeze their plans. Cost savings would not be possible in a benchmark model in which i)...

We derive the optimal corporate pension portfolio policy in a consolidated setting in the presence of PBGC insurance. The paper's result formalizes the forces of risk shifting and risk management that shape the form of the corporate pension portfolio. As in Rauh (2009), the risk-shifting and...

U.S. corporate sponsors of defined benefit (DB) pension plans in recent years have been de‐risking by paying premiums to transfer their pension plan assets and liabilities to the balance sheets of third‐party insurers. The passage of the Moving Ahead for Progress in the 21st Century Act...

It is well known that the market-to-book equity ratio and total asset growth are negatively associated with future stock returns. Much less known is that the predictabilities are related through the mispricing channel. We show that the growth-value anomaly is governed by ex-ante total asset...

This paper uses accounting-based reverse engineering of market expectations to identify potentially mispriced stocks. Building upon the “errors-in-expectations” hypothesis, we develop a theoretically funded yet practical tool for stock screening in this paper. We use the Ohlson (1995) model...