DB : Inactive / Active members and risk tolerance

The higher the Inactive / Active members ratio, the lower the Duration of liabilities, therefore the lower the risk tolerance.

That’s fine.

Is it also true, that the higher the ratio, the higher the liquididy requirements, therefore the lower the risk tolerance ?



Yes becuase they have to pay in a shorter time period and cannot afford to lose from the asset base. If they diminish the asset base they wont be able to recover fast enough due to the short duration.

Ok txs. That’s also what I thought. It’s not include in the guideline answers. Meh.

Btw: read the case! Sometimes they use the reciprocal of the above stated ratio…