Pension fund risk management [29]

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Bullet points include: Project forward tangible assets and liabilities of IORP under multiple scenarios with probability weighted average being market consistent Estimate loss given default (LGD) suffered by beneficiaries if sponsor defaults at a given point in time during each projection Probability weight LGDs in market consistent manner given an assumed sponsor default rate Default rate could be time dependent and / or correlated with performance of IORP’s tangible assets and liabilities. Conceptually similar to pricing credit risk exposures under Credit Value Adjustments etc. in bank trading activities Equate with shortfall (versus value of a fully risk-free benefit) implicit in a funded arrangement that does not have recourse to a sponsor covenant

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