Pension fund risk management [23]

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Bullet points include: Same basic formula as for bond pricing, i.e. But with a variable ‘recovery’ (hence a variable LGD) because: Scheme might make a recovery from the sponsor when sponsor defaults Members might get some of their promised benefits honoured from tangible assets then held by scheme even if no recovery by scheme as per (a) Quantum of tangible assets (and liabilities which these assets partially support) and LGD may vary through time and according to scenario being considered, e.g. scheme may invest in risky assets, mortality improvements or expenses may be greater than expected, sponsor may pay contributions, sponsor may be more likely to default  in some scenarios …

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