DYNAMIC HEDGING STRATEGIES FOR CASH BALANCE PENSION PLANS

2018 ◽  
Vol 48 (3) ◽  
pp. 1245-1275
Author(s):  
Xiaobai Zhu ◽  
Mary R. Hardy ◽  
David Saunders
Keyword(s):  
The United States ◽  
Pension Plans ◽  
Bond Yields ◽  
Cash Balance ◽  
The Past ◽  
Hedging Strategies ◽  
Considerable Impact ◽  
The One ◽  
Discrete Hedging ◽  
Cash Balance Pension Plans

AbstractCash balance pension plans with crediting rates linked to long bond yields are relatively common in the United States, but their liabilities are proving very challenging to hedge. In this paper, we consider dynamic hedge strategies using the one-factor and two-factor Hull White models, based on results for the liability valuation from Hardy et al. (2014). The strategies utilise simple hedge portfolios combining one or two zero-coupon bonds, and a money market account. We assess the effectiveness of the strategies by considering how accurately each one would have hedged a 5-year cash balance liability through the past 20 years, using real-world returns and crediting rates, and assuming parameters calibrated using the information available at the time. We show that there is considerable impact of model and parameter uncertainty, with additional, less severe impact from discrete hedging error and transactions costs. Despite this, the dynamic hedge strategies do manage to stabilize surplus substantially, even through the turbulence of the past two decades.

Adopting cash balance pension plans: implications and issues

2004 ◽  
Vol 3 (3) ◽  
pp. 271-295 ◽  
Author(s):  
ROBERT L. CLARK ◽  
SYLVESTER J. SCHIEBER
Keyword(s):  
Pension Plans ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Contribution Rate ◽  
Cash Balance ◽  
The Past ◽  
Defined Contribution Plans ◽  
Lump Sum ◽  
Defined Benefit Plans ◽  
Cash Balance Pension Plans

Over the past 15 to 20 years, many companies have converted their traditional defined benefit plans to cash balance or pension equity plans. In a cash balance plan, the worker's ‘account’ is based on an annual contribution rate for each year of employment, plus accumulating interest on annual contributions. A pension equity plan defines the benefit as a percentage of final average earnings for each year of service under the plan. Both types of plans specify the benefit as a lump sum payable at termination. In contrast, traditional defined benefit plans specify benefits in terms of an annuity payable at retirement. From the employees' perspective, cash balance and pension equity plans look somewhat like defined contribution plans. However, they are funded, administered, and regulated as defined benefit plans.

The Cost and Duration of Cash-Balance Pension Plans

2001 ◽  
Vol 57 (6) ◽  
pp. 50-62 ◽  
Author(s):  
David T. Brown ◽  
Philip H. Dybvig ◽  
William J. Marshall
Keyword(s):  
Pension Plans ◽  
Cash Balance ◽  
The Cost ◽  
Cash Balance Pension Plans

BOREDOM

PEDIATRICS ◽  
1982 ◽  
Vol 70 (3) ◽  
pp. 454-454
Author(s):  
Keyword(s):  
The United States ◽  
Upper Class ◽  
The Good Life ◽  
Social Trends ◽  
The Past ◽  
Admission Test ◽  
The One ◽  
Teenage Suicide ◽  
Drug And Alcohol ◽  
Unrealistic Expectations

Boredom kills, and those it does not kill, it cripples, and those it does not cripple, it bleeds like a leech, leaving its victims pale, insipid and brooding. Examples abound... Television, the one-eyed beast blamed for scourges ranging from immorality to declining college-admission test scores, has probably helped bring home boredom to America. It has done so by offering us a splendidly wrongheaded view of how one goes about living the good life... Boredom, at the very least, helps breed some of America's uglier social trends. The rate of teenage suicide has more than tripled in the United States since 1955, and psychiatrists across the country lay part of the blame to boredom born of unrealistic expectations and frustration. Divorce condemns nearly half of all marriages, and marriage counselors report boredom as a major cause. Drug and alcohol abuse—which has increased more rapidly in the past decade among middle and upper-class teenagers than among the less wealthy—is caused, in part, by the need to kill time.

scholarly journals An Act of War? The Interview Affair, the Sony Hack, and the Hollywood–Washington Power Nexus Today

2017 ◽  
Vol 53 (1) ◽  
pp. 1-27
Author(s):  
TONY SHAW ◽  
TRICIA JENKINS
Keyword(s):  
The United States ◽  
Global Market ◽  
Us Foreign Policy ◽  
First Century ◽  
The Other ◽  
State Security ◽  
The Past ◽  
Early Twenty ◽  
The Us ◽  
The One

Film has been an integral part of the propaganda war fought between the United States and North Korea over the past decade. The international controversy surrounding the Hollywood comedy The Interview in 2014 vividly demonstrated this and, in the process, drew attention to hidden dimensions of the US state security–entertainment complex in the early twenty-first century. Using the emails leaked courtesy of the Sony hack of late 2014, this article explores the Interview affair in detail, on the one hand revealing the close links between Sony executives and US foreign-policy advisers and on the other explaining the difficulties studios face when trying to balance commercial and political imperatives in a global market.

Subjective value of the guarantees embedded in public cash-balance pension plans

2017 ◽  
Vol 17 (2) ◽  
pp. 231-250
Author(s):  
CHUN-HUA TANG
Keyword(s):  
Risk Aversion ◽  
Option Pricing ◽  
Pension Plans ◽  
Numerical Results ◽  
Cash Balance ◽  
Certainty Equivalence ◽  
Subjective Value ◽  
Public Sectors ◽  
The Cost ◽  
Cash Balance Pension Plans

AbstractSome public sectors provide cash-balance pension plans with guaranteed interest credits. We use the certainty-equivalence framework to derive the subjective value of the guarantee perceived by the participant. Numerical results show that in many scenarios the subjective value is lower than the cost of the guarantee derived by option pricing approaches, implying that public sectors potentially spend too much in providing the guarantee. However, the subjective value could be higher than the cost of the guarantee under some scenarios, depending on the participant's level of risk aversion, the feasibility of diversification, and so forth.

Myths and Realities in US-Cuban Relations

1993 ◽  
Vol 35 (2) ◽  
pp. 103-114
Author(s):  
Jaime Suchlicki
Keyword(s):  
United States ◽  
Economic Crisis ◽  
The United States ◽  
Fidel Castro ◽  
The Past ◽  
Soviet Empire ◽  
Dual Strategy ◽  
The One

The deepening economic crisis in Cuba, the collapse of the Soviet empire, an aging leadership and revolution, and mild overtures from Fidel Castro toward the United States have, together, served to encourage those US observers who believe that the time for rapprochement with Cuba has come. In this line of reasoning, closer relations with Cuba, particularly in the economic field, will both moderate Castro's penchant for revolution and lead, eventually, to the advent of perestroika on that troubled island.In the past, Castro has pursued a dual strategy in dealing with the United States. On the one hand, Havana has made rhetorical overtures designed to reduce tensions between the two countries.

scholarly journals Are Cash Balance Pension Plans A Viable Retirement Program For Corporate America?

2012 ◽  
Vol 10 (8) ◽  
pp. 451
Author(s):  
John J. Lucas
Keyword(s):  
Pension Plans ◽  
Defined Benefit ◽  
Corporate America ◽  
Defined Contribution ◽  
Cash Balance ◽  
Benefit Plan ◽  
Recent Trends ◽  
Program Option ◽  
Cash Balance Pension Plans

Cash Balance Pension Plans are a defined benefit plan where employees have a hypothetical account that increases annually, as a result of compensation credit as well as interest credit. In essence, cash balance pension plans combine elements of both a traditional defined benefit plan and a defined contribution plan (Lucas, 2007). This paper examines the recent trends and legal ruling regarding cash balance pension plans. The paper also provides an examination of the role of the Pension Protection Act (PPA) of 2006 and its impact on cash balance pension plans. An evaluation will also be presented to determine if cash balance pension plans are a viable retirement program option in corporate America.

Variety into Vaudeville, The Process Observed in Two Manuscript Gagbooks

1978 ◽  
Vol 19 (1) ◽  
pp. 1-15
Author(s):  
Laurence Senelick
Keyword(s):  
United States ◽  
The United States ◽  
Private Life ◽  
The Past ◽  
The One ◽  
Original Songs ◽  
As If

“As a jester among jesters,” Jack Point commends himself to a would-be mountebank in Gilbert and Sullivan's The Yeoman of the Guard, “I will teach thee all my original songs, my self-constructed riddles, my own ingenious paradoxes; nay more, I will reveal to thee the source whence I get them.” The “source” in this case is a tome entitled The Merry Jestes of Hugh Ambrose, a compendium of asthmatic wheezes, Gilbert's thrust at not only Elizabethan jestbooks but their Victorian counterparts. At times it must have seemed as if printing had been invented only to enable aspiring comedians to plunder the wit of the past from cheap chapbooks, like the one that gave Joe Miller to the vernacular. In the United States, dissemination of these storehouses of “gags” began as early as 1789, and by the 1860s they were a staple of the bookstalls; the intended market for them was either the laugh-loving churchgoer who wouldn't be caught dead in a theatre, or the parlor entertainer, the “clown of private life,” ready to make unwilling interlocutors of his nearest and dearest. In the 1870s, however, publishers aimed at the professional; Henry J. Wehman's 25¢ paperback Budget of Jokes was meant to fill a need of the evergrowing number of variety performers.

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