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Pension fund risk management [28]

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Bullet points include: A final subtlety is that credit risk pricing techniques generally aim to identify a market value for the risk I.e. price at which a marginal transaction would take place Typical assumption is that market investors’ portfolios are (or can be adjusted to be) appropriately diversified (so non-systematic risk can then be ignored) Equivalent to taking risk-neutral probability weighted average Ignores concentration risk But members unlikely to be able to diversify away or hedge their (non-systematic) credit risk exposure to the sponsor More relevant to long serving employees, less relevant to individuals who have changed jobs a lot

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