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Pension fund risk management [35]

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Bullet points include: Kemp (2011) provides a stylised prototype of above approach IORP invests its opening assets in a (single) risky asset portfolio which evolves as per Black-Scholes Benefits involve a single (fixed) payment at a fixed in time in the future. No new contributions are paid into scheme until that point in time and then only if there is a sponsor covenant and the sponsor hasn’t defaulted Sponsor default intensity assumed fixed in time and independent of evolution of assets IORP members view benefit entitlement through a pure market consistent framework ignoring concentration of credit risk to sponsor (i.e. it is assumed that they can hedge this exposure somehow) No other benefit security mechanisms are considered (initially) Making these stylised assumptions more realistic and IORP specific may be challenging

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