This article compares expected pension default losses of employees and retirees before and after pension buyouts. The comparisons are made using a stochastic model calibrated with market data. The employees remain in the defined benefit (DB) pension plan while the retirees become annuity holders...

There has been a surge of interest in recent years from defined benefit pension plan sponsors in de-risking their plans with strategies such as “longevity hedges” and “pension buyouts” (Lin et al., 2015). While buyouts are attractive in terms of value creation, they are capital intensive...

Pension buy-ins and buy-outs have become an important aspect of managing pension risk in recent years. As a step toward understanding these pension de-risking instruments, we develop models for pricing investment risk and longevity risk embedded in pension buy-ins and buy-outs. We also bring a...