Pricing of a resettable guarantee of a salary-connected individual pension account

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Title:	Pricing of a resettable guarantee of a salary-connected individual pension account
Authors:	CHEN, CHAO-LIANG
Contributors:	淡江大學經濟學系
Keywords:	Individual pension account;salary-connected;reset feature
Date:	2016-10
Issue Date:	2015-02-02 20:54:24 (UTC+8)
Publisher:	Cambridge University Press
Abstract:	The present paper numerically prices a resettable guarantee of a salary-connected individual pension account (IPA). The results indicate that a principal guarantee without a reset feature is not worth much unless the volatility of assets in the IPA is huge, while the death benefit contributes a very small proportion to the guarantee value. Deferred proportional funding is an alternative to reducing problems from the difficulty in modeling salary behavior, because the required deferred proportional cost is impacted less by the salary behavior. Moreover, if the lapse from a guarantee is possible, then the guarantee is not necessarily more valuable for a younger individual.
Relation:	Journal of Pension Economics and Finance 15(4), p.357-378
DOI:	10.1017/S1474747214000481
Appears in Collections:	[Graduate Institute & Department of Economics] Journal Article

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