Intergenerational risk trading

From a life cycle theory perspective, both young and old individuals may gain from a reallocation of equity and wage risk exposure between each other. However, current financial markets do not offer wage growth-linked securities and borrowing against labor income without collateral is difficult. In this paper, Jiajia Cui (Shell Asset Management) and Eduard Ponds (TiU, APG) propose a market-based voluntary risk trading arrangement between coexisting generations via an innovative swap market where participants trade equity-related returns for wage-linked returns, and vice versa, to improve intergenerational risk reallocation.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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