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Risks 2017, 5(1), 5; doi:10.3390/risks5010005

Minimum Protection in DC Funding Pension Plans and Margrabe Options

Institute of Statistic, Biostatistic and Actuarial Science (ISBA), Université catholique de Louvain (UCL), Voie du Roman Pays, 20, 1348 Louvain-la-Neuve, Belgium
Authors to whom correspondence should be addressed.
Academic Editor: Luca Regis
Received: 14 November 2016 / Revised: 22 December 2016 / Accepted: 10 January 2017 / Published: 18 January 2017
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The regulation on the Belgian occupational pension schemes has been recently changed. The new law allows for employers to choose between two different types of guarantees to offer to their affiliates. In this paper, we address the question arising naturally: which of the two guarantees is the best one? In order to answer that question, we set up a stochastic model and use financial pricing tools to compare the methods. More specifically, we link the pension liabilities to a portfolio of financial assets and compute the price of exchange options through the Margrabe formula. View Full-Text
Keywords: pensions; Defined Contributions; guaranteed rate; option theory; Margrabe formula pensions; Defined Contributions; guaranteed rate; option theory; Margrabe formula

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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Devolder, P.; de Valeriola, S. Minimum Protection in DC Funding Pension Plans and Margrabe Options. Risks 2017, 5, 5.

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