Correlation and the Pension Protection Fund

Paul Sweeting

Fiscal Studies, 2006, vol. 27, issue 2, 157-182

Abstract: In this paper, I use a stochastic approach to model the effect that correlations between pension scheme assets and firm values should have on the premiums chargeable by the Pension Protection Fund. In particular, I look at the effect on the aggregate premium that should be charged considering a representative universe of companies and their pension schemes. I find that ignoring the correlations, even if the volatility of pension scheme assets is allowed for, leads to potentially serious underestimation of the aggregate premium due.

JEL-codes: G11 G13 G22 G23 G28 J26 (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:ifs:fistud:v:27:y:2006:i:2:p:157-182

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