Research in Actuarial Science: Minimum Protection in DC Funding Pension Plans and Margrabe Options

New Scientific Paper: Minimum Protection in DC Funding Pension Plans and Margrabe Options

In the context of their academic research, our chairman, Professor Pierre Devolder, together with Reacfin’s senior consultant Dr. Sébastien de Valeriola, recently published a scientific paper regarding the valuation of pension plan features.

In Belgium a recent law change allows employers to choose between two different types of guarantees to offer to their affiliates. In this paper, the authors address the question arising naturally: which of the two guarantees is the best one? In order to answer that question, they set up a stochastic model and use financial pricing tools to compare the methods. More specifically, they link the pension liabilities to a portfolio of financial assets and compute the price of exchange options through the Margrabe formula.

This paper entitled “Minimum Protection in DC Funding Pension Plans and Margrabe Options” is currently available on the site of the Multidisciplinary Digital Publishing Institute here