본문 바로가기
  • Home

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.

Citation status

* References for papers published after 2022 are currently being built.