Financial Market Assumptions & Models for Pension Plans: A Technical Comment on the PIMS Model Assumptions for Asset Markets

Pension Research Council Working Paper, PRC WP2013-08

31 Pages Posted: 8 Oct 2013

See all articles by Christopher Geczy

Christopher Geczy

University of Pennsylvania - The Wharton School, Finance Department

Date Written: September 2013

Abstract

The financial market assumptions of the PBGC’s PIMS model are critical inputs to simulations for most apparent uses of the system. They currently appear to be based on a reduced form, "classical" approach to assessing and forecasting the distribution of returns on various classes of input assets, allowing for a fairly sophisticated and useful approach to understanding simulated distributions of potential pension insurance outcomes as well as the net financial status of the PBGC. This technical note discusses some of the capital market side assumptions utilized in the model. It also comments on important related assumptions including the assumed asset allocations of insured plans, making suggestion for possible modification of input assumptions of the model to reflect time variation in financial market return behavior as well as time variation in observed plan allocations.

Suggested Citation

Geczy, Christopher Charles, Financial Market Assumptions & Models for Pension Plans: A Technical Comment on the PIMS Model Assumptions for Asset Markets (September 2013). Pension Research Council Working Paper, PRC WP2013-08, Available at SSRN: https://ssrn.com/abstract=2337131 or http://dx.doi.org/10.2139/ssrn.2337131

Christopher Charles Geczy (Contact Author)

University of Pennsylvania - The Wharton School, Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
(215) 898-1698 (Phone)
(215) 898-6200 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
63
Abstract Views
931
Rank
625,098
PlumX Metrics