Practitioner Seminar with Henrik Olejasz Larsen, Sampension
FRIC Practitioner Seminar with Henrik Olejasz Larsen, Sampension
Hedging pension liabilities when there are incomplete markets and regulatory uncertainty
Pension liabilities are in principle calculated at market values. This has been so in Denmark for several years and is expected to be included in future EU regulation. For that purpose financial regulators have determined complicated discount rate curves. But for several reasons the resulting values cannot be replicated in markets creating difficulties in risk management: What should be hedged, how can the best hedge be constructed and maintained, and how does the hedge portfolio perform relative to the liabilities over time? And what if the most worrying risk is a change in regulation?