A Study on the Value of Retirement Benefit Guaranty Considering Financial Status of Pension Plan (연금재정상황을 고려한 퇴직급여 지급보증가치에 관한 연구)

Kyung-jin, Choi (최경진); Han,Dong (한동); Sung Jooho (성주호)

A Study on the Value of Retirement Benefit Guaranty Considering Financial Status of Pension Plan

Journal of Insurance and Finance
2015, 26(1), pp.109-139
Publisher : Korea Insurance Research Institute
Research Area : Social Science > Business Management

Kyung-jin, Choi ¹, Han,Dong ², Sung Jooho ²

¹근로복지공단 근로복지정책연구센터
²경희대학교

Accredited

ABSTRACT

This study proposed a model for calculating the value of benefit guaranty in the retirement benefit guaranty system and analyzed the model by applying it to actual data. The Ronn & Verma(1986) model used in previous study has more or less shortcoming in respect of modelling on grounds, which fails to consider the financial status of DB funds. In order to solve this kinds of problems, we adopted the exchange option model proposed by Margrabe(1978) for calculating the value of retirement benefit guaranty. By applying the model, we find out that the value of benefit guaranty is higher, when the correlation between return on assets and the liability growth rate is low and also we have the same results in each of following cases that (ⅰ) the funded ratio was low and (ⅱ) the volatility on asset returns and on liability growth rates each is high. These findings are also supported by the results of empirical analysis on five companies, whose funded ratio is between 60‐100%. Therefore, if the value of benefit guaranty obtained by the exchange option model is used as the risk‐based premium of the guaranty system, it may prevent companies’ moral hazards and adverse selections and then it would maintain the finance soundness of benefit guaranty corporations. Moreover, it would be expected to have a positive effect on the activation of ALM.

KEYWORDS

Retirement Benefit Guaranty, Pension Put Option, Volatility of Pension Asset and Liability, Funded Ratio, Exchange Option

Citation status

* References for papers published after 2023 are currently being built.

[other] 고용노동부 / 2014 / 안정적인 노후 준비와 퇴직급여 설문조사결과

[other] 금융감독원 / 2014 / 퇴직연금 누적적립금규모

[journal] 김병덕 / 2003 / Estimating the value of retirement allowance guarantee for listed firms in Korea / 금융연구 / 한국금융연구원 17(2) : 83~104

[journal] 백원선 / 2002 / A Study on the Valuation of the Guarantee Introduced by Corporate Pension Plan: An Option-Based Model / 리스크관리연구 / 한국리스크관리학회 13(2)

[thesis] 이동우 / 2001 / 한국 투기등급채권 가격결정모형의 실증연구 / 석사 / 한국과학기술원

[other] 한국거래소 / 2013 / 코스피지수(2001년-2013년)

[journal] Cummins, J.D. / 1988 / Risk-Based Premiums for Insurance Guaranty Funds / Journal of Finance 43(4) : 823~839

[journal] Duan, J. / 2005 / Fair Insurance Guaranty Premia in the Presence of Risk-Based Capital Regulations, Stochastic Interest Rate and Catastrophe Risk / Journal of Banking & Finance 29(10) : 2435~2454

[journal] Hsieh, S. / 1994 / The Valuation of PBGC Insurance Premiums Using an Option Pricing Model / Journal of Financial and Quantitative Analysis 29(1) : 89~99

[journal] Margrabe, W. / 1978 / The Value of An Option to Exchange One Asset for Another / Journal of Finance 33(1) : 177~186

[journal] Markus, A. / 1984 / The Valuation of FDIC deposit Insurance using option-pricing estimates / Journal of Money, Credit and Banking 16 : 446~460

[book] Markus, A. / 1987 / Chapter 3 in Issues in Pension Economics / University of Chicago Press : 49~80

[journal] Merton, R. C. / 1977 / An Analytical Derivation of Cost of Deposit Insurance and Loan Guarantee: An application of modern option pricing theory / Journal of Banking and Finance : 3~11

[journal] Ouwehand, P. / 2006 / Pricing rainbow options / Willmott Magazine : 74~80

[journal] Pennacchi, G. / 1994 / The Value of Pension Benefit Guaranty Corporation Insurance / Journal of Money, Credit and Banking 26(3) : 735~753

[book] Pesando, J. E. / 1996 / Securing Employer-Based Pensions / The Pension Research Council and University of Pennsylvania Press

[book] Petersen, M / 1996 / Pensions, Savings and Capital Markets / U.S. Department of Labor

[journal] Ronn, E.I. / 1986 / Pricing Risk-Adjusted Deposit Insurance : An Option-Based Model / Journal of Finance 41(4) : 871~895

[journal] Sharpe, W. / 1976 / Corporate pension funding policy / Journal of Financial Economics 3(3) : 183~193

[journal] Treynor, J / 1977 / The Principles of Corporate Pension Finance / Journal of Finance 32(2) : 627~638

[book] Villani, G. / 2010 / Mathematical and Statistical Methods for Actuarial Science and Finance / Springer

[report] Yang, T. / 2003 / Defined Benefit Pension Plan Liabilities and International Asset Allocation / University of Michigan Retirement Research Center

[web] / 한국은행 경제통계시스템 / http://ecos.bok.or.kr/

[other] / 2014 / KIS-Value

KJCKorea
Journal Central

Journal of Insurance and Finance 2023 KCI Impact Factor : 0.59