Valuation of pension liabilities in incomplete markets*

Frank de Jong

Journal of Pension Economics and Finance, 2008, vol. 7, issue 3, 277-294

Abstract: This paper discusses the valuation of wage-indexed pension liabilities. Valuation of these contingent claims by replication is typically not possible as the wage index cannot be hedged perfectly with financial market instruments. This paper discusses several methods to find a value in such incomplete markets and advocates utility-based valuation. This approach implies a simple adjustment on the discount factor.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jpenef:v:7:y:2008:i:03:p:277-294_00

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