The Valuation of PBGC Insurance Premiums Using an Option Pricing Model

Su-Jane Hsieh, Andrew H. Chen and Kenneth R. Ferris

Journal of Financial and Quantitative Analysis, 1994, vol. 29, issue 1, 89-99

Abstract: This study applies an option pricing model to empirically derive pension put values for a sample of 176 individual pension plan sponsors insured by the Pension Benefit Guaranty Corporation (PBGC). This study finds that the pension put values for a group of 22 underfunded sponsors were significantly greater than the insurance premiums paid to the PBGC. On the other hand, for a group of 154 overfunded sponsors, the put values were also greater than the pension premiums paid to the PBGC, although the difference was not statistically significant. These findings suggest that underfunded plan sponsors are significantly undercharged by the PBGC, while overfunded plan sponsors are approximately fairly charged.

Date: 1994
References: Add references at CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:29:y:1994:i:01:p:89-99_00

Access Statistics for this article

More articles in Journal of Financial and Quantitative Analysis from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().