Can anybody explain in a simple way pages 84-85 from book 3 schweser? Doesn’t seem to stick. It’s about the liabilities created by employees Non Market exposures are pretty clear. then you have Accrued benefits - retired participants - use nominal bonds and real bond depending on type of pension (if it’s linked to inflation or not) - active participants- same as above Future Benefits - future wage growth - real growth - use stocks - inflation generated growth - use real return bonds - future service rendered - not usually funded - new entrants - don’t do anything as it is hard to anticipate my question is… are they basically separating the future benefits in future benefits created by increase of years * current wage and increase in number of years*growth in wage??
Pop, this looks right to me. The one point I am not to sure of is the future service rendedred which you have indicated is not funded. I thought this factured into to the calculation you put there, but only for current plan participants and therefore is part of the pension funding requirement.