Corporate Pension Risk Management and Corporate Finance: Bridging the Gap between Theory and Practice in Pension Risk Management


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Reading Source:
https://www.soa.org/Files/Research/Projects/research-2015-corporate-pension-risk-management.pdf

Topics Covered in this Reading:

  • Introduction
  • Principles from Financial Economics
  • Calculation of Key Corporate Financial Metrics
    • Holistic Corporate Balance Sheet and Corporate Leverage
    • Example of How a Pension Plan Impacts Debt-to-Equity Ratio
    • Holistic Balance Sheet - Pension Plan Perspective
    • Rating Agency Adjustments
    • Weighted Average Cost of Capital
  • Approaches to Risk Budgeting
    • Value-at-Risk Approach
    • Traditional Sensitivity Analysis
    • Maintaining the Same Equity and Debt Beta
  • Evaluation of Empirical Evidence
    • Impact of Pension Plans on Stock Price
    • Impact of Pension Accounting on Stock Price
    • Impact of Pension on Crediting Rating and Credit Spread
    • Firm Behavior with Respect to PBGC
    • Impact of Pension on Company Beta
  • Summary of Sponsor Survey
  • Conclusion