Guaranteeing benefits in generational pension plans
Balance sheet management
Academic Paper
1 October 2010
In this paper we analyze the consequences of intergenerational risk sharing in a generational DB pension fund. Each generation is subject to discretionary investment, indexation and contribution policies, thereby losing intergenerational diversification gains. Intergenerational risk sharing is repaired by introducing contingent claims on the generational surplus. We find that in some circumstances the values of these options can be substantial.