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Reference | Title | Link |
Freeman, M., Clacher, I., Hillier, D., Kemp, M.H.D., Abourashchi, N. and Zhang, Q. (2012) | Pension plan solvency and extreme market movements: a regime switching approach | here |
Introductory paragraph
"The aim of this research is to analyse the impact of extreme market movements on future pension plan solvency by applying a regime switching approach. The motivation for undertaking the analysis came from the financial crisis and the collapse of Lehman Brothers in September 2008 and the subsequent policy response in March 2009 of Quantitative Easing (QE). According to the Pension Protection Fund (PPF), between June 2007 and March 2009, the overall asset values of defined benefit plans fell by nearly 8% (as a combination of a severe fall in equity values but an offsetting rise in bond prices), while the present value of future liabilities rose by almost 40% as Gilt yields fell. Since then , the aggregate funding position has worsened despite a recovery in asset values as further declines in Gilt yields have driven the present value of liabilities even higher." |
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